Testing equality of coefficients in the same model

**moocowcn** · May 19th 2010, 06:30 AM

Hello, can anyone help me with the following problem?

I have a model called Svensson model, which is used to fit yield curves.

The model reads

$r\left(\tau\right)=\left[ \begin{matrix} \beta_0\\\beta_1\\\beta_2\\\beta_3 \end{matrix} \right]'\left[ \begin{matrix} 1\\ \lambda_1\left(1-e^{-\tau/\lambda_1}\right)/\tau\\ \lambda_1\left(1-e^{-\tau/\lambda_1}\right)/\tau-e^{-\tau/\lambda_1}\\ \lambda_2\left(1-e^{-\tau/\lambda_2}\right)/\tau-e^{-\tau/\lambda_2}\\ \end{matrix} \right]. $

In this model, $r\left(\tau\right)$ is the bond yield at maturity $\tau$ , $\beta_0, \beta_1, \beta_2, \beta_3,\lambda_1\text{ and }\lambda_2$ are the six parameters that need to be estimated.

The components represent the level, slope, first and second hump/trough of a yield curve. As the third and fourth components share the same form, they may be highly correlated which will cause estimation problem. So we want to avoid the fourth component if possible. To do this, we need to test whether $\lambda_1\text{ and }\lambda_2$ are statistically different.

Does anyone know the way to test the equality of these two coefficients?

Thanks.

Thread: Testing equality of coefficients in the same model

LinkBack

Thread Tools

Display

Testing equality of coefficients in the same model

Similar Math Help Forum Discussions

Predicate Calculus help (interpretation of equality in a model of equality)

Sample data is closer to a simple linear model or an exponential model?

Testing equality of variances using the F distribution.

Testing equality of variance

Testing two variances is the same as testing two means?

Search Tags