Opschoor, Daan; van der Wel, Michel - 2022
We propose a smooth shadow-rate version of the dynamic Nelson-Siegel (DNS) model to analyze the term structure of … interest rates during the recent zero lower bound (ZLB) period. By relaxing the no-arbitrage restriction, our shadow-rate model … state. Moreover, we show that the smooth shadow-rate DNS model dominates the baseline DNS model in terms of fitting and …