Modeling the Term Structure from the On-the-Run Treasury Yield Curve

25 Pages Posted: 26 Nov 2001

See all articles by Sattar Mansi

Sattar Mansi

Virginia Polytechnic Institute & State University

Jeffery H. Phillips

Phillips and Green, M.D.

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Date Written: November 2001

Abstract

We propose a new model to estimate the term structure of interest rates using observed on-the-run Treasury yields. The new model is an improvement over models that require apriori knowledge of the shape of the yield curve to estimate the term structure. The general form of the model is an exponential function that depends on the estimation of four parameters fit by nonlinear least squares and has straightforward interpretations. In comparing the proposed model with current yield curve smoothing models, we find that, for the data used, the proposed model does best overall in terms of pricing accuracy both in-sample and out-of-sample.

Keywords: on-the-run Treasuries, Yield curve estimation

JEL Classification: E34, G12

Suggested Citation

Mansi, Sattar and Phillips, Jeffery H., Modeling the Term Structure from the On-the-Run Treasury Yield Curve (November 2001). Available at SSRN: https://ssrn.com/abstract=291340 or http://dx.doi.org/10.2139/ssrn.291340

Sattar Mansi (Contact Author)

Virginia Polytechnic Institute & State University ( email )

Jeffery H. Phillips

Phillips and Green, M.D.

Pittsburgh, PA 15282
United States

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