01560cam a22002297 4500001000600000003000500006005001700011008004100028100002500069245010700094260006600201490004100267500001900308520064300327530006100970538007201031538003601103710004201139830007601181856003701257856003601294w5346NBER20170523223307.0170523s1995 mau||||fs|||| 000 0 eng d1 aAit-Sahalia, Yacine.10aTesting Continuous-Time Models of the Spot Interest Rateh[electronic resource] /cYacine Ait-Sahalia. aCambridge, Mass.bNational Bureau of Economic Researchc1995.1 aNBER working paper seriesvno. w5346 aNovember 1995.3 aDifferent continuous-time models for interest rates coexist in the literature. We test parametric models by comparing their implied parametric density to the same density estimated nonparametrically. We do not replace the continuous-time model by discrete approximations, even though the data are recorded at discrete intervals. The principal source of rejection of existing models is the strong nonlinearity of the drift. Around its mean, where the drift is essentially zero, the spot rate behaves like a random walk. The drift then mean-reverts strongly when far away from the mean. The volatility is higher when away from the mean. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w5346.4 uhttp://www.nber.org/papers/w534641uhttp://dx.doi.org/10.3386/w5346