Exercise

Volatility and correlation of interest-rate data

In this exercise you will explore whether volatility and serial dependence is also a feature of daily and monthly interest-rate log-returns. The dataset zcb_x contains daily log-returns for the 1-year, 5-year and 10-year Canadian zero-coupon bond yields while zcbx_m contains the corresponding monthly log-returns.

Instructions

100 XP

Make acf plots and cross-correlation plots for zcb_x and the absolute values of zcb_x.
Apply the Ljung-Box test to the components of zcb_x and the absolute values with the option lag = 10.
Make acf plots and cross-correlation plots for zcbx_m and the absolute values of zcbx_m.
Apply the Ljung-Box test to the components of zcbx_m and the absolute values with the option lag = 10.

Take Hint (-30 XP)