Term Structure Estimation In Low Frequency Transaction Markets
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Author | : Gonzalo Cortazar |
Publisher | : |
Total Pages | : 38 |
Release | : 2004 |
Genre | : |
ISBN | : |
There are two issues that are of central importance in term structure analysis. One is the modeling and estimation of the current term structure of spot rates. The second is the modeling and estimation of the dynamics of the term structure. These two issues have been addressed independently in the literature. The methods that have been proposed assume a sufficiently complete price data set and are generally implemented separately. However, when the methods are applied to markets with sparse bond price, results are unsatisfactory.We develop a method for jointly estimating the current term structure and its dynamics for markets with low-frequency transactions. We propose solving both issues by using a dynamic term structure model estimated from incomplete panel data. To achieve this, we modify the standard Kalman filter approach to deal with the missing-observation problem. In this way, we can use historic price data in a dynamic model to estimate the current term structure. With this approach we are able to obtain an estimate of the current term structure even for days with an arbitrary low number of price observations.The proposed methodology can be applied to a broad class of continuous-time term-structure models with any number of stochastic factors. To show the implementation of the approach, we estimate a three-factor generalized-Vasicek model using Chilean government bond price data. The approach, however, may be used in any market with low-frequency transactions, a common characteristic of many emerging markets.
Author | : International Monetary Fund |
Publisher | : International Monetary Fund |
Total Pages | : 64 |
Release | : 2010-11-01 |
Genre | : Business & Economics |
ISBN | : 1455209589 |
This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
Author | : B.Philipp Kellerhals |
Publisher | : Springer Science & Business Media |
Total Pages | : 247 |
Release | : 2012-11-02 |
Genre | : Business & Economics |
ISBN | : 3540246975 |
Covers applications to risky assets traded on the markets for funds, fixed-income products and electricity derivatives. Integrates the latest research and includes a new chapter on financial modeling.
Author | : Valentin Ulrici |
Publisher | : Josef Eul Verlag GmbH |
Total Pages | : 246 |
Release | : 2007 |
Genre | : Bond market |
ISBN | : 3899366409 |
Author | : Gonzalo Cortazar |
Publisher | : |
Total Pages | : |
Release | : 2013 |
Genre | : |
ISBN | : |
There are two issues that are of central importance in term-structure analysis. One is the modelling and estimation of the current term structure of spot rates. The second is the modelling and estimation of the dynamics of the term structure. These two issues have been addressed independently in the literature. The methods that have been proposed assume a sufficiently complete price data set and are generally implemented separately. However, there are serious problems when these methods are applied to markets with sparse bond prices.We develop a method for jointly estimating the current term-structure and its dynamics for markets with infrequent trading. We propose solving both issues by using a dynamic term-structure model estimated from incomplete panel-data. To achieve this, we modify the standard Kalman filter approach to deal with the missing-observation problem. In this way, we can use historic price data in a dynamic model to estimate the current term structure. With this approach we are able to obtain an estimate of the current term structure even for days with an arbitrary low number of price observations.The proposed methodology can be applied to a broad class of continuous-time term-structure models with any number of stochastic factors. To show the implementation of the approach, we estimate a three-factor generalized-Vasicek model using Chilean government bond price data. The approach, however, may be used in any market with infrequent trading, a common characteristic of many emerging markets.
Author | : Ying He |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 2011-10-01 |
Genre | : Business & Economics |
ISBN | : 1463923260 |
The paper assesses estimates of term structure models for the United States. To this end, this paper first describes the mathematics underlying two types of term structure models, namely the Nelson-Siegel and Cox, Ingersoll and Ross family of models, and the estimation techniques. It then presents estimations of some of specific models within these families of models?three-factor Nelson-Siegel Model, four-factor Svensson model, and preference-free, two-factor Cox, Ingersoll and Roll model?for the United States from 1972 to mid 2011. It subsequently provides an assessment of the estimations. It concludes that these estimations of the term structure models successfully capture the dynamics of the term structure in the United States.
Author | : Hwagyun Kim |
Publisher | : |
Total Pages | : 28 |
Release | : 2017 |
Genre | : |
ISBN | : |
This paper empirically studies the role of macro factors in explaining and predicting daily bond yields. In general, macro-finance models use low-frequency data to match with macroeconomic variables available only at low frequencies. To deal with this, we construct and estimate a tractable no-arbitrage affine model with both conventional latent factors and macro factors by imposing cross-equation restrictions on the daily yields of bonds with different maturities, credit risks, and inflation indexation. The estimation results using both the US and UK data show that the estimated macro factors significantly predict actual inflation and the output gap. In addition, our daily macro term structure model forecasts better than no-arbitrage models with only latent factors as well as other statistical models.
Author | : Michiel de Pooter |
Publisher | : Rozenberg Publishers |
Total Pages | : 286 |
Release | : 2007 |
Genre | : |
ISBN | : 9051709153 |
This dissertation consists of a collection of studies on two areas in quantitative finance: asset return volatility and the term structure of interest rates. The first part of this dissertation offers contributions to the literature on how to test for sudden changes in unconditional volatility, on modelling realized volatility and on the choice of optimal sampling frequencies for intraday returns. The emphasis in the second part of this dissertation is on the term structure of interest rates.
Author | : Torben Gustav Andersen |
Publisher | : Springer Science & Business Media |
Total Pages | : 1045 |
Release | : 2009-04-21 |
Genre | : Business & Economics |
ISBN | : 3540712976 |
The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Author | : Krisztina Nagy |
Publisher | : |
Total Pages | : 132 |
Release | : 2011 |
Genre | : Interest rates |
ISBN | : |