A Rotated Dynamic Nelson‐Siegel Model

11 Pages Posted: 5 Jan 2018

See all articles by Ken Nyholm

Ken Nyholm

European Central Bank (ECB)

Date Written: February 2018

Abstract

I show how to rotate the factor structure of the well‐known Dynamic Nelson‐Siegel yield‐curve model to enable direct parametrization of the short rate process. This makes it easy to calculate model‐implied term premia and to integrate macroeconomic variables into the model in a Taylor‐rule‐type fashion.

Suggested Citation

Nyholm, Ken, A Rotated Dynamic Nelson‐Siegel Model (February 2018). Economic Notes, Vol. 47, Issue 1, pp. 113-124, 2018, Available at SSRN: https://ssrn.com/abstract=3096783 or http://dx.doi.org/10.1111/ecno.12094

Ken Nyholm (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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