Bank of England Working Paper No. 24
Posted: 6 Nov 2003
This paper examines various techniques used to estimate the term structure of interest rates from the prices of government bonds; in particular comparing the current Bank of England model with two approaches suggested in the academic literature. There are two main aspects of this problem: estimating the relationship between bond yields and maturity, and the relationship between bond yields and coupon. The paper outlines how these problems are approached by the three models, and compares them on both theoretical and practical grounds. It concludes that there is a trade-off between theoretical rigour and practical considerations.
JEL Classification: E43, G12
Suggested Citation: Suggested Citation
Deacon, Mark and Derry, Andrew, Estimating the Term Structure of Interest Rates. Bank of England Working Paper No. 24. Available at SSRN: https://ssrn.com/abstract=76612