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1 . Vasicek Model of interest rates: In the Worksheet Prob 2 you are provided the one - year deposit rate interest rates downloaded from

1. Vasicek Model of interest rates: In the Worksheet Prob 2 you are provided the one-year deposit rate interest rates downloaded from Professor Robert Shillers (Nobel prize winner for Economics, Yale University) website. The series starts from 1871 and end in 2011. What are the parameters of the Vasicek process, that is, a) the long run mean b) speed of mean reversion and c) volatility of the process? (Hint: Use t =1).Year One year Interest rates r(t)
18716.35
18727.81
18738.35
18746.86
18754.96
18765.33
18775.03
18784.9
18794.25
18805.1
18814.79
18825.26
18835.35
18845.65
18854.22
18864.26
18876.11
18885.02
18894.68
18905.41
18915.97
18923.93
18938.52
18943.32
18953.09
18965.76
18973.44
18983.55
18993.36
19004.64
19014.3
19024.72
19035.5
19044.34
19054.17
19065.47
19076.23
19085.32
19093.65
19105.26
19114
19124.35
19135.65
19144.64
19153.65
19163.64
19174.25
19185.98
19195.56
19207.3
19217.44
19224.58
19234.96
19244.34
19253.87
19264.28
19274.26
19284.64
19296.01
19304.15
19312.43
19323.36
19331.46
19341.01
19350.75
19360.75
19370.88
19380.88
19390.56
19400.56
19410.53
19420.63
19430.69
19440.72
19450.75
19460.76
19471.01
19481.35
19491.58
19501.32
19512.12
19522.39
19532.58
19541.8
19551.81
19563.21
19573.86
19582.54
19593.74
19604.28
19612.91
19623.39
19633.5
19644.09
19654.46
19665.44
19675.55
19686.17
19698.05
19709.11
19715.66
19724.62
19737.93
197411.03
19757.24
19765.7
19775.28
19787.78
197910.88
198011.37
198117.63
198214.6
19839.37
198411.11
19858.35
19867.31
19876.25
19887.63
19899.29
19908.43
19916.92
19923.91
19933.44
19944.35
19956.45
19965.68
19975.78
19985.68
19995.31
20006.61
20014.63
20021.85
20031.18
20041.49
20053.41
20065.32
20075.34
20083.42
20091.02
20100.46
20110.37

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