End September 2008 Real-world interest rate distribution: USD nominal, real and inflation rates
Document ID: 2008-1117 (previously 2008-10)
Published on: 21st October 2008
Author: Zhuoshi Liu
This note describes the ESG ‘real-world’ calibration for stochastic models for USD real and nominal term-structures and inflation. The specific calibrations shown here should be viewed as one of many reasonable choices for the parameters set in the interest rate models. The ESG, however, is flexible enough to allow users to obtain different real world distributions (by changing model parameters) which look different to our proposed distributions reflecting own views regarding the short-term and long-term outlook for interest rates and inflation. In this note, we give a short description of the interest rate models that B+H has employed for its ESG and show the distribution of the projected nominal, real rates and inflation at the end of September 2008.
