Abstract:
Interest rates play an important role in the financial environment, affecting business transactions directly or indirectly.
Fluctuations in interest rates caused largely by demand and supply of credit, regulated by the apex banks, impacts business transactions
in the Economy. Understanding the dynamics of interest rates is therefore very important to Financial institutions, individual and
corporate investors. In this work, the dynamics of Bank of Ghana’s, daily interest rates, ( Jan 2020 - July 2021) is modeled using the
Hull-White model. London interbank offer rates, for the same period are included in the analysis. By estimating the parameters of the
model, and using a computation algorithm for the solution of the SDE of the model; It is found that the mean reverting model captured
the BOG and LIBOR rates well, largely maintaining the trend of the data structure. It also pointed to the presence of jumps in the data
sets
