Estimating and Interpreting Zero Coupon and Forward Rates: Australia, 1992-2001

59 Pages Posted: 1 Feb 2004

Date Written: January 15, 2004

Abstract

This paper presents estimates of zero coupon yield curve of Australian treasuries. Pure discount bonds and implied forward rates, although not available for the entire yield curve, are extremely useful for pricing, modelling and analyzing financial securities, hence, the need to extract the theoretical yield curve from noisy prices observed in the market place. Two popular models for curve fitting: the Nelson-Siegel and Svensson model, together with two specifications are adopted for estimating zero coupon and forward yield rates. The six parameter Svensson's model outperforms the more parsimonious Nelson-Siegel four parameter functional form. A structural break is detected in the zero coupon time series in the test period.

Keywords: Curve fitting, forward rate, parsimonious model, term structure, yield, zero coupon bond

JEL Classification: G12, C13

Suggested Citation

Kalev, Petko S., Estimating and Interpreting Zero Coupon and Forward Rates: Australia, 1992-2001 (January 15, 2004). Available at SSRN: https://ssrn.com/abstract=495702 or http://dx.doi.org/10.2139/ssrn.495702

Petko S. Kalev (Contact Author)

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
571
Abstract Views
2,907
rank
52,367
PlumX Metrics