Question
The linear relation between the short rate of interest and long rates of interest is an example of a co-integrating relation. This is known as
The linear relation between the short rate of interest and long rates of interest is an example of a co-integrating relation. This is known as the term spread. The term spread co-integration relation:
a. Cannot be estimated with OLS, because we are regressing one non-stationary variable on another non-stationary variable.
b. Can be estimated with OLS.
c. Can only be estimated with MLE.
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Investments
Authors: Zvi Bodie
12th Edition
1260819426, 9781260819427
