Download or read book Yield Curve Modeling and Forecasting written by Francis X. Diebold and published by Princeton University Press. This book was released on 2013-01-15 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.
Download or read book Real Time Forecasting of U S Bond Yields and Their Excess Returns written by Joseph H. Davis and published by . This book was released on 2008 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Some bond investors form expectations for future interest rates by either assuming that yields will not change over time (i.e. random walk), or that future spot rates will evolve to match current forward rates (i.e., the expectations hypothesis). Recent academic research argues that we can do significantly better by modeling term structure dynamics as some time-varying function of current spot and forward rates. Using a new Federal Reserve Board dataset, we examine the out-of-sample forecasting ability of these and other dynamic models for U.S. Treasury bonds and their excess returns. Broadly speaking, we find that none of these models has consistently and statistically outperformed a random walk across bond maturities since 1985. We reconcile our findings with those that claim stronger predictability by tracing the deterioration in out-of-sample forecasts to changes in the U.S. inflation process. From this, we specify simple yield dynamics that out-forecast a random walk in real time. We discuss avenues for future research.
Download or read book Forecasting the Term Structure of Government Bond Yields written by Francis X. Diebold and published by . This book was released on 2003 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite powerful advances in yield curve modeling in the last twenty years, comparatively little attention has been paid to the key practical problem of forecasting the yield curve. In this paper we do so. We use neither the no-arbitrage approach, which focuses on accurately fitting the cross section of interest rates at any given time but neglects time-series dynamics, nor the equilibrium approach, which focuses on time-series dynamics (primarily those of the instantaneous rate) but pays comparatively little attention to fitting the entire cross section at any given time and has been shown to forecast poorly. Instead, we use variations on the Nelson-Siegel exponential components framework to model the entire yield curve, period-by-period, as a three dimensional parameter evolving dynamically. We show that the three time-varying parameters may be interpreted as factors corresponding to level, slope and curvature, and that they may be estimated with high efficiency. We propose and estimate autoregressive models for the factors, and we show that our models are consistent with a variety of stylized facts regarding the yield curve. We use our models to produce term-structure forecasts at both short and long horizons encouraging results. In particular, our forecasts appear much more accurate at long horizons than various standard benchmark forecasts.
Download or read book Forecasting Interest Rates written by John B. Schwartzman and published by McGraw-Hill Companies. This book was released on 1992 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Set up your own simple, one-page charts that track and assess interest rates and the factors affecting them--on a weekly, monthly, or quarterly basis. Determine, with a high degree of accuracy, in which direction the various trends influencing interest rates are likely to push them. Supplemented by a host of charts, graphs, examples, and illustrations, Forecasting Interest Rates allows you to spot the all-important events that cause interest rates to move--whether they're front-page news or subtle incidents. It shows you how to recognize a reliable interest rate factor from a red herring--whether the source is the Department of Commerce, the Department of Labor Statistics, the Federal Reserve Board, a university research center, or a nonprofit company specializing in business economic research.
Download or read book Modeling Long term Government Bond Yields written by Paul Sundell and published by . This book was released on 1992 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book How to Forecast Interest Rates written by Martin J. Pring and published by McGraw-Hill Companies. This book was released on 1981 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Forecasting government bond yields with large Bayesian VARs written by Andrea Carriero and published by . This book was released on 2010 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Forecasting US Bond Yields at Weekly Frequency written by Riccardo Lucchetti and published by . This book was released on 2006 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dynamic Modeling Approach to Forecast the Term Structure of Government Bond Yields written by Min Fu and published by . This book was released on 2013 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since arbitrage-free is a desirable theoretical feature in a healthy financial market, many efforts have been made to construct arbitrage-free models for yield curves. However, little attention is paid to review if such restriction will improve yield forecast. We evaluate the importance of arbitrage-free restriction on dynamic Nelson-Siegel term structure when forecasting yield curves. We find that it doesn't help. We also compare these two Nelson-Siegel dynamic models with a benchmark dynamic model and show that Nelson-Siegel structure improve forecasts for long-maturity yields.
Download or read book Forecasting Bond Yields with Segmented Term Structure Models written by Caio Almeida and published by . This book was released on 2016 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inspired by the preferred-habitat theory, we propose parametric interest rate models that split the term structure into segments. The proposed models are compared to successful term structure benchmarks based on out-of-sample forecasting exercises using US Treasury data. We show that segmentation can improve long-horizon term structure forecasts when compared to non-segmentation. Additionally, introducing cointegration in latent factor dynamics of segmented models makes them particularly strong to forecast short-maturity yields. Better forecasting is justified by the segmented models' ability to accommodate idiosyncratic shocks in the cross-section of yields.
Download or read book Forecasting bond yields written by Andrew Bosomworth and published by . This book was released on 1993 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Bond Pricing and Yield Curve Modeling written by Riccardo Rebonato and published by . This book was released on 2018-06-07 with total page 781 pages. Available in PDF, EPUB and Kindle. Book excerpt: Rebonato provides an authoritative, clear, and up-to-date explanation of the cutting-edge innovations in affine modeling for government bonds, and provides readers with the precise tools to develop their own models. This book combines precise theory with up-to-date empirical evidence to build, with the minimum mathematical sophistication required for the task, a critical understanding of what drives the government bond market.
Download or read book A Model of Bond Value written by Thomas Shelvin and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper looks to establish a new heuristic for investors, giving them a simple, intuitive way to relate bond yields to prevailing trends in growth and inflation. The model offers an alternative to forecasting surveys, which have been over-estimating 10-year Treasury yields for decades and continue to project yields above 4% in the long run. The model does well in in-sample and out-of-sample tests used in the literature to evaluate other measures of value. The model can be used on its own or in conjunction with other models to forecast yields and also as a benchmark to evaluate yield forecasts. The model is consistent with some of the more advanced economic models of interest rates that suggest that the low bond yields of recent years are in line with broader economic trends, rather than due to temporary factors that are likely to reverse quickly.
Download or read book Bond Yield Analysis written by Stuart R. Veale and published by . This book was released on 1988 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Bond Risk Premia written by John Howland Cochrane and published by . This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of forward rates. The return forecasting factor has a clear business cycle correlation: Expected returns are high in bad times, and low in good times, and the return-forecasting factor forecasts long-run output growth. The return-forecasting factor also forecasts stock returns, suggesting a common time-varying premium for real interest rate risk. The return forecasting factor is poorly related to level, slope, and curvature movements in bond yields. Therefore, it represents a source of yield curve movement not captured by most term structure models. Though the return-forecasting factor accounts for more than 99% of the time-variation in expected excess bond returns, we find additional, very small factors that forecast equally small differences between long term bond returns, and hence statistically reject a one-factor model for expected returns
Download or read book Forecasting Bond Yields with Segmented Term Structure Models written by Caio Ibsen Rodrigues de Almeida and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Out of Sample Predictability of Bond Returns written by Luiz Paulo Fichtner and published by . This book was released on 2013 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the out-of-sample predictive power for one-year bond excess returns for a variety of models that have been proposed in the literature. We find that these models perform well in sample, but have worse out-of-sample performance than the historical sample mean. We write the one-year excess return on a n-maturity bond at time t + 1 as the difference between n times the n-maturity bond yield at time t, and the sum of n - 1 times the (n - 1)-maturity bond yield at time t + 1 and the one-year bond yield at time t. Instead of forecasting returns directly, we forecast bond yields and replace them in the bond ex- cess return definition. We use two bond yield forecasting methods: a random walk and a dynamic Nelson-Siegel approach proposed by Diebold and Li (2006). An investor who used a simple random walk on yields would have predicted bond excess returns with out-of-sample R-squares of up to 15%, while a dynamic Nelson-Siegel approach would have produced out-of-sample R-squares of up to 30%.
