When the yield curve is modelled using an a ffine factor model, residuals may still contain relevant information and do not adhere to the familiar white noise assumption. This paper proposes a pragmatic way to improve out of sample performance for yield curve forecasting. The proposed adjustment...

To investigate yield curve dynamics, researchers have employed a wide variety of models, including the famous Nelson-Siegel level, slope, and curvature factors, and principal components analysis, among others. In this paper, we decompose the term structure of HIBOR (Hong Kong Interbank Offered...

In this paper we suggest a simple empirical and model-independent measure of Central Banks' Conservatism, based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the considered countries. We demonstrate that it evolves in...

We propose an Adaptive Dynamic Nelson-Siegel (ADNS) model to adaptively detect parameter changes and forecast the yield curve. The model is simple yet flexible and can be safely applied to both stationary and nonstationary situations with different sources of parameter changes. For the 3- to...

This paper studies the 28 time series of Libor rates, classified in seven maturities and four currencies), during the last 14 years. The analysis was performed using a novel technique in financial economics: the Complexity-Entropy Causality Plane. This planar representation allows the...

The following article examines a stochastic, log-normal model for the continuously compounding yield-to-maturity and a corresponding price model for default-free zero coupon bonds. This article sets conditions for the validity of the model and goes on to show that this model is a special case of...

The dynamic Nelson-Siegel model and its extensions are used by many central banks to forecast the term structure. Their forecasting performance has been studied for many countries, but a little can be said about their accuracy for emerging market economies (EMEs). In this work we test the...

Over the past decade, inflation has become less responsive to domestic demand pressures in many industrial countries. This development has been attributed, in part, to globalization forces. A small macroeconomic model, estimated on UK data using Bayesian estimation, is used to analyze the...

It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates. Moreover, the diffusion term in the rate dynamics goes to zero...

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...