Abstract:
In this paper, we use the Bernoulli Jump Diffusion (BJD) process to test for the existence and probability of jumps in the Kenyan interest rates. We test these using the Maximum Likelihood Estimation (MLE) method on the weekly changes in the 91 day Kenyan treasury bills rates. We also compare the BJD process and the Pure Diffusion Process (PDP) in modeling these interest rates. We use the statistical software Eviews 6 to analyze the data.
