Log-gamma motion as flexible model for generalized interest rates

Negative, oscillating, and near zero interest rates are changing financial modeling completely. To address this situation, we introduce novel, flexible, and estimable model of interest rate. This model is based on recent developments of so-called Inv-Log-Gamma process. This model is much easier to be estimated as the continuous time models for interest rates with dampings, where interest rate r_t possesses a martingale property. Even though the estimation of continuous time interest rates is a difficult task. Therefore, more flexible and estimable model for interest rate is needed, which motivates our developments. Simulation and real data examples illustrate usefulness of our development.