I came across a paper by Rodda (2004), who simulates interest rates with a Markov sequence. To simulate changes in the interest rates, they used the historical transition probabilities. Their transition table looks as follows:enter image description here

The rows represent the initial interest rate level, and the columns the possible change in interest rate. I was wondering how to compute such a table with data from another country, as they did not explain it in the paper.


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