Disturbing extremal behavior of spot rate dynamics

This paper presents a study of extreme interest rate movements in the US federal funds market over almost a half century of daily observations from the mid 1950s through the end of 2000. We analyze the fluctuations of the maximal and minimal changes in short-term interest rates and test the significance of time-varying paths followed by the mean and volatility of extremes. We formally determine the relevance of introducing trend and serial...