Evolving Yield Curves in the Real-World Measures: A Semi-Parametric Approach
Posted: 25 Apr 2005
Abstract
In this paper, we show how to evolve a yield curve over time horizons of the order of years using a simple but effective semi-parametric method. The proposed technique preserves in the limit all the eigenvalues and eigenvectors of the observed changes in yields. It also recovers in a satisfactory way several important statistical features (unconditional variance, serial autocorrelation, distribution of curvatures, eigenvectors) of the real-world data. A simple financial explanation can be provided for the methodology. The possible financial applications are discussed.
Keywords: Yield curve, semi-parametric, eigenvalues, eigenvectors
Suggested Citation: Suggested Citation
Rebonato, Riccardo and Mahal, Sukhdeep and Joshi, Mark and Buchholz, Lars-Dierk and Nyholm, Ken, Evolving Yield Curves in the Real-World Measures: A Semi-Parametric Approach. Available at SSRN: https://ssrn.com/abstract=708106
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.
