Modelling interest rates: Vasicek model explained (Excel)

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Vasicek (1977) model is the foundational econometric technique for modelling and understanding the dynamics of interest rates as well as for forecasting their future values and volatility and has applications in monetary macroeconomics and bond risk management. Today we discuss the concepts behind the model and its Excel implementation. Econometrics is easy with NEDL!
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Опубликовано:

22 июл 2024

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Комментарии : 36

@NEDLeducation 2 года назад

You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7 Please consider supporting NEDL on Patreon: www.patreon.com/NEDLeducation

@pedrocolangelo5844 2 месяца назад

Amazing as always. NEDL is a gift for everyone who studies econometrics.

@peterc.2301 2 года назад

Amazing video Sava! Thank you so much! A video based on ML would definitely be a great idea indeed!

@siamgangte2826 2 года назад

Briliant, Sava! Thanks for your generosity!! Please do another one with MLE approach, looking forward to it!

@Shulk2021 Год назад

Incredible explanation and simplification

@silentstorm718 2 года назад

You're the man Sava!

@davidgomezaldana9507 Год назад

Great video ! it helps a lot ! very specific and easy way to explein ! thanks

@batumeftun Год назад

amazing as always. I stress again: NEDL is better then any Finance Master :D

@luigibombelli7577 2 года назад

Thanks Sava indeed...prof.

@surendrabarsode8959 2 года назад

Brilliant. Thanks Savva. Please do it for using MLE as well as videos on other interest rates models!! Your videos make complicated ideas simple and easy to understand.

@NEDLeducation 2 года назад

Hi Surendra, and many thanks for your comment! I am planning to record more videos on interest rate modelling, including with MLE.

@surendrabarsode8959 2 года назад

@@NEDLeducation Thanks Savva. If possible, please indicate books, articles etc. from where you pick up the formulas. It would help to link theory with excel practical examples you explain in the videos. Warm regards.

@reubenmarfo9855 3 месяца назад

@@NEDLeducationdo you have videos using MLE? Thanks

@diphl3694 Год назад

Thank you for the video it was really helpful! but what happens if the t-test is not significance? could the vasicek model still be used for an interest data set? (also what does it mean if parameters a, b and sigma are negative?)

@mountaindrew_ Год назад

Hello! Shouldn't the gaussian error in the discretized form be scaled for the square root of DeltaT?

@ryandiedricks435 2 года назад

Excellent videos! Can you do a video of forecasting GDP please?

@MrMahankumar 2 года назад

Hey man great!!!!!! I didn't even know about this model lol

@ExpertMathematician Год назад

What is the hypothese that used in p value?. Is it H0 : the data can be modelled by vasicek model?

@bharatkumar-tk5qb Год назад

nice

@amritdash3469 4 месяца назад

How can we use this approach to build a term structure of rates with one set of parameters working across the tenors?

@romeodaniels43 2 года назад

please can you help me with how you calculated the coefficients *a* and *ab* and also the standard error and sigma

@NEDLeducation 2 года назад

Hi Romeo, and thanks for the question! These are retrieved from a LINEST function template which is almost always a go-to way for regression modelling in Excel. I am actually about to release a tutorial on the LINEST function itself very soon so you can see for yourself how the parameters and other regression outputs can be retrieved there generally (not only for the Vasicek model implementation).

@user-wg7nw3mh2e 2 года назад

Is it possible to use GARCH to adjust the convergence parameter interest rate / inflation shocks?

@NEDLeducation 2 года назад

Hi, and thanks for the question! Yes, you could estimate the model combining GARCH and Vasicek mean-reversion, however this would require maximum likelihood estimation.

@user-wg7nw3mh2e 2 года назад

@@NEDLeducation ok I guess I would like to you to do the maximum likely estimations you suggested. Also what adjustments are needed to use daily frequency or even tick data? ( i suppose for tick data you'd need to transfer to python?)

@olivermohr417 8 месяцев назад

Doesn't Vasicek model require a lambda*sigma term (risk-premium) in its drift when calibrated to historical data?

@shivampardeshi9977 5 месяцев назад

if p value is insignificant so what to do in that case?

@gokselbilici605 2 года назад

Wow, just wow. Thanks man🤗

@NEDLeducation 2 года назад

Hi Göksel, and glad you liked the video! Stay tuned for more videos on econometrics or check the playlist: ru-vid.com/group/PLE4a3phdCOav7rXE4RjOROGYBfdXHnIkJ

@gokselbilici605 2 года назад

@@NEDLeducation Yeap, subbed already ;) Btw, I wanted to experiment with my country interest rates but my excel function linest wouldn't work as an array, I activated it with Ctrl+Shift+Enter. Do you have any guesses why it didn't work? Because internet didn't help me much why :)

@gokselbilici605 2 года назад

Oh, just find a solution: using index :) like--> =INDEX(LINEST($C$3:$C$305;$D$3:$D$305;1;1);5;1)

@NEDLeducation 2 года назад

@@gokselbilici605 Yes, this is an absolutely amazing workaround :)

@NWKastaways 2 года назад

Would G12 cell (a convergence) be considered mean reversion speed?

@NEDLeducation 2 года назад

Hi Juan, and thanks for the question. Yes, absolutely, this is a correct interpretation of the parameter.

@arielmodesto4696 2 года назад

# brasil congratulations your content is very top!!!! Yes Yes if you can make the model of how to use the vero semenhaça to compare the best model we thank