Download or read book Modeling the Volatility of the Heath-Jarrow-Morton Model written by Anjun Zhou and published by . This book was released on 2000 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on the nonparametric study of Pearson and Zhou (1999), a parametric HJM model is developed for the forward rate volatility. It allows the volatility of the forward rate with different maturities to react in a different way with the level of forward rate and the forward spread. Specifically, the proposed forward rate volatility function is imbedded into GARCH family models and compared with several widely used HJM volatility specifications. It is shown that the proposed volatility specification performs the best. It is also confirmed that the volatility of forward rate with different maturities depends on the forward rate and the forward spread in a different way.