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 the Term Structure of Government Bond Yields Using Credit Spreads and Structural Breaks written by Azamat Abdymomunov and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we investigate whether credit spread curve information helps forecast the government bond yield curve and whether the joint dynamics of the government bond yields and credit spreads have structural changes. For this purpose, we use a joint dynamic Nelson-Siegel (DNS) model of the term structures of U.S. Treasury interest rates and credit spreads. We find that this joint model produces substantially more accurate out-of-sample Treasury yields forecasts compared with a standard DNS yield curve only model. We also find that the predictive gain from incorporating the credit spread curve information substantially increases if the joint model accounts for structural changes in the dynamics of yield and credit spread curves. In addition, our model incorporates a zero lower bound restriction ensuring that our predictions are economically plausible.
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 the Term Structure of Government Bond Yields in Unstable Environments written by Joseph Byrne and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we model and predict the term structure of US interest rates in a data-rich and unstable environment. The dynamic Nelson-Siegel factor model is extended to allow the model dimension and the parameters to change over time, in order to account for both model uncertainty and sudden structural changes, in one setting. The proposed specification performs better than several alternatives, since it incorporates additional macro-finance information during hard times, while it allows for more parsimonious models to be relevant during normal periods. A dynamic variance decomposition measure constructed from our model shows that parameter uncertainty and model uncertainty regarding different choices of predictors explain a large proportion of the predictive variance of bond yields.
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 Forecasting Term Structure of Government Bond Yields in Thailand written by Pongpit Pinsai and published by . This book was released on 2007 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 The Information Content of the Term Structure of Interest Rates written by Frank Browne and published by [Paris, France] : OECD, Department of Economics and Statistics. This book was released on 1989 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Forecasting the Yield Curve of Government Bonds written by Chao He and published by . This book was released on 2013 with total page 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 Term Structure of Interest Rates written by Burton Gordon Malkiel and published by Princeton University Press. This book was released on 2015-12-08 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt: Can expectations alone explain the yield differentials among bonds of different maturities? To what extend do attitudes toward risk and transactions costs influence the behavior of bond investors? Is it possible for the Federal Reserve to "twist" the interest-rate structure in accordance with its policy objectives? These are among the questions treated. Originally published in 1966. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.
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 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 The Term Structure of Expectations and Bond Yields written by Richard K. Crump and published by . This book was released on 2018 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bond yields can be decomposed into expected short rates and term premiums. We directly measure the former using all available U.S. professional forecasts and obtain the latter as the difference between bond yields and survey-based expected short rates. While the behavior of nominal and real short rate expectations is consistent with standard macroeconomic theory, term premiums account for the bulk of the cross-sectional and time series variation in yields. They also largely explain the yield curve's reaction to a host of structural economic shocks. This dramatic failure of the expectations hypothesis highlights the importance of term premiums for macro-financial transmission.
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 The Term Structure of Interest Rates written by David Meiselman and published by . This book was released on 1962 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Term Structure of Interest Rates written by John Driffill and published by . This book was released on 1990 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines data on interest rates in the United Kingdom information on changes in policy regime and their credibility in order to discover the period from 1959-87 using quarterly data. A stochastic regime switching model used by Hamilton, based on an AR(4) model for short rates, and the corresponding model for long rates, does not adequately represent the UK data. Yields on long-term UK government debt behave consistently with the expectations model of the term structure, on a number of basic tests. Their relationship with yields on treasury bills, however, is not consistent with the theory unless an autoregressive risk premium is introduced into the holding period yield on long bonds. The only evidence of a change in the time-series behaviour of long bond yields in these data occurs at the end of 1974. There is no evidence of a policy change in 1979 or 1980. The hypothesis that these interest rates contain unit roots cannot be rejected. Therefore, tests of the expectations model devised by Campbell and Shiller to take account of unit roots in the data were undertaken, but they revealed no evidence of departures from the expectations model.
