engleski

An Application of the Cox, Ingersoll, Ross model to the Croatian Government securities market

After a simple intuitive derivation of the single-factor Cox, Ingersoll and Ross (CIR) model of the term structure, it is used to extract the term structure of interest rates from observed prices of (fixed rate) Croatian Government bonds. We assume, as it model requires, that the risk of default can be ignored. The parameters of the model and the spot rate value are estimated using cross-sections of prices for two dates. The resulting yield curves, corresponding to the estimated parameters, are so-called inverse yield curves, for both dates.

term structure of interest rates; CIR model; Croatian Government bonds; parameters estimation; yield curve

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