Vasicek(1977) and CIR(1985) models are frequently uesed in theory and practice because they provide closed-form expression for default free bond prices which are amendable to empirical testing.
This thesis demonstrate parameter bias of Vasicek and CIR processes using the simulation technique in OLS and GMM estimation methods and correct this estimation bias with the Secant method which is a general approach of Newton Rapson method employed in Tanizaki's numerical optimization procedure.
In this paper, I can show that the proposed numerical procedure optimized by the Secant method can be applied in GMM as well as in the OLS with same correction power. Additionally, I estimate term structure of interest rate in Korea and correct estimation bias using Certificate of Deposit with maturity 91 days as a proxy variable of short term interest rate.
