In this paper, we utilize the dynamic Nelson-Siegel model to forecast the joint density of changes in the term structure of interest rates. We specify a flexible model for the factor dynamics and their dependence structure using time-varying copulas, thus allowing for departure from the...

We investigate the forecasting performance of popular dynamic factor models of the yield curve after the global financial crisis (GFC). This time period is characterized by an unprecedented low and non-volatile interest rate environment in most major economies. We focus on the dynamic...

In this paper we consider a novel procedure for forecasting the US yield curve by using the methodology of nonparametric kernel estimation of functional data (NP-FDA). Within this approach, each element of the sample is a monthly yield curve, evaluated at points corresponding to maturities. In...

The aim of this study is to test the ability of the yield curve on US government bonds to forecast the future evolution in the prices of commodities often used in as raw materials. We consider the monthly prices of nine commodities for more than 30 years. Our findings, confirmed by several...

Parametric term structure models have been successfully applied to numerous problems in fixed income markets, including pricing, hedging, managing risk, as well as to the study of monetary policy implications. In turn, dynamic term structure models, equipped with stronger economic structure,...

While the yield spread has long been recognized as a good predictor of recessions, it seems to have been largely overlooked by professional forecasters. We examine this puzzle, established by Rudebusch and Williams (2009), in a data-rich environment including not just the yield spread but many...

Issues like structural breaks and misspecification biases make it difficult to find a term structure of interest rates forecast model that dominates all competitors. Focusing on Brazilian data, this paper aims to identify the existence of combining methods that provide superior performance than...

We assess the ability of yield curve factors to predict risk premia in short-term interest rates and exchange rates across a large sample of major advanced economies. We find that the same tick-shaped linear combination of (relative) bond yields predicts risk premia in both short-term interest...

In this paper, we provide adjustments for liquidity and credit risk to the forward Libor rate in order to improve accuracy of the forward rate in forecasting the 3-month Libor rate. In particular, we introduce the adjusted forward curve (AFC) that models the update in the forward curve from one...

This paper adopts a novel approach to studying the evolution of interest rate term structure over the U.S. business cycles and to predicting recessions. Applying an effective algorithm, I classify the Treasury yield curve into distinct shapes and find the less frequent shapes intrinsically...