The affine arbitrage-free class of Nelson-Siegel term structure models
We derive the class of affine arbitrage-free dynamic term structure models that approximate the widely used Nelson-Siegel yield curve specification. These arbitrage-free Nelson-Siegel (AFNS) models can be expressed as slightly restricted versions of the canonical representation of the three-factor affine arbitrage-free model. Imposing the Nelson-Siegel structure on the canonical model greatly facilitates estimation and can improve predictive performance. In the future, AFNS models appear likely to be a useful workhorse representation for term structure research.
Year of publication: |
2011
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Authors: | Christensen, Jens H.E. ; Diebold, Francis X. ; Rudebusch, Glenn D. |
Published in: |
Journal of Econometrics. - Elsevier, ISSN 0304-4076. - Vol. 164.2011, 1, p. 4-20
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Publisher: |
Elsevier |
Keywords: | Yield curve Interest rate Bond market Factor model Forecasting |
Saved in:
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