Thank you in advance. I use the yield to maturity of 2year, 3year, 5year and 7year japan government bond from 1989-2019 as my data (i.e. the name of my data is
vasicdata), they are all daily data, and each year contains 261 daily data, so I use:
library(SMFI5) est.vasicek(vasicdata, method = "Hessian", days = 261, significanceLevel = 0.95)
and I got these results:
alpha = 0.1762 /+ 0.0000, beta = 1.3912 /+ 0.0000, sigma = 34.0658 /+ 0.0000, q1 = -0.0081 /+ 0.0000, q2 = 0.0792 /+ 0.0000, phi = 0.9981, phiest = 0.9993 /+ 0.0000
Why is the sigma so large? Is it the problem of the yield to maturity data? Should I use the data of spot rate? If so, how can I change the YTM into spot rate?
If I don't use the package
SMFI5in R, could anyone tell me how to use the Maximium Likelihood Estimation (MLE) method to estimate the parameters?