MODELS FOR ESTIMATING THE STRUCTURE OF INTEREST RATES FROM OBSERVATIONS OF YIELD CURVES

1999 ◽  
pp. 53-120 ◽  
Author(s):  
K. O. KORTANEK ◽  
V. G. MEDVEDEV
Keyword(s):  
Interest Rates ◽  
Yield Curves

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

Corporate Bond Markets

2019 ◽  
pp. 113-130
Author(s):  
Kelly E. Carter
Keyword(s):  
Interest Rates ◽  
Credit Ratings ◽  
Corporate Bonds ◽  
Corporate Bond ◽  
Bond Markets ◽  
Bond Prices ◽  
Wall Street ◽  
Yield Curves ◽  
Bond Portfolios ◽  
The Impact

This chapter covers the fundamentals of corporate bond markets. It begins by highlighting the size and importance of these markets, followed by a discussion of the major types of corporate bonds and the process of issuing bonds. Next, the chapter provides a discussion of important relationships between a bond’s price and market interest rates, including the key observation that bond prices move opposite market interest rates. The next topic focuses on duration and convexity, which are techniques to estimate the dollar and percent changes in bond prices for a given change in market interest rates, followed by a discussion of bond immunization, which is a technique used to protect the value of bond portfolios from adverse changes in market interest rates. The final topics covered concern yield curves, credit ratings, and the impact of the Dodd-Frank Wall Street Reform Act of 2010 on corporate bond markets.

scholarly journals The gilt-edged market reformulated

1977 ◽  
Vol 104 (2) ◽  
pp. 227-240
Author(s):  
K. S. Feldman
Keyword(s):  
Interest Rates ◽  
Yield Curve ◽  
Yield Curves ◽  
Market Prices ◽  
Simple Assumption ◽  
New Model ◽  
Uniform Rate ◽  
Conventional Analysis ◽  
The Future ◽  
Yield Calculation

1.1. In this note it is argued that models of the gilt-edged market which are based on yield curves are unnecessarily restrictive and should not be expected to give a satisfactory statistical ‘fit’ in current conditions. The new model which is formulated relates market prices directly to the life and coupon without diverting into the computation of redemption yields. Indeed, it is suggested that the yield calculation destroys the inherent simplicity of the underlying equations—which follow from a simple assumption concerning the return from different portfolios. The method avoids the inconsistency inherent in the conventional analysis of discounting future investment proceeds at a uniform rate of interest when the yield curve itself implies that interest rates will vary in the future.

More nations will issue ultra-long sovereign bonds

2019 ◽  
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Bond Market ◽  
Government Bond ◽  
Market Conditions ◽  
Yield Curves ◽  
Government Bonds ◽  
Content Type ◽  
Sovereign Bonds

Subject Ultra-long government bonds. Significance Interest rates are low while yield curves have flattened as longer-term bonds have appreciated more in capital terms than shorter-term instruments. In this environment, issuing sovereign bonds that will mature in 50 or 100 years is becoming increasingly popular with governments. Impacts Further government bond issuance will add to the already high global debt mountain. The combination of investors searching relentlessly for high yielding assets and populations ageing could push interest rates even lower. Many emerging markets are cutting interest rates, making ultra-long bonds more attractive; more governments will issue such bonds. Rising inflation and interest rates would reverse currently supportive bond market conditions and decimate demand for ultra-long bonds.

Term Structure of Interest Rates with B-Spline Model during the Money-Shortage-Event in China

2014 ◽  
Vol 989-994 ◽  
pp. 5634-5637
Author(s):  
Peng Zheng ◽  
Lian Qiang Yang ◽  
Zhen Ni Dai
Keyword(s):  
Structural Change ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curves ◽  
B Spline ◽  
Parametric Test ◽  
B Splines ◽  
Price Data ◽  
Significant Structural Change ◽  
Total Test

Using the price data of bonds’ transactions during June 2013, the discounting function is fitted by non-uniform cubic B-Splines and yield curves are modeled. Models’ single parametric test and total test are both significant. Furthermore, the structural change’s test shows that there is no significant structural change between adjacent transaction days, which means that the bonds’ market is relatively steady during June 2013.

scholarly journals Brazilian term structure of interest rate modeling: A Nelson-Siegel approach

2016 ◽  
Vol 14 (1) ◽  
pp. 414-432
Author(s):  
Adalto Barbaceia Gonçalves ◽  
Felipe Tumenas Marques
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Future Research ◽  
Model Parameters ◽  
Extensive Literature ◽  
Bond Markets ◽  
Fixed Rate ◽  
Yield Curves ◽  
Vec Model ◽  
Parsimonious Models

Forecasting interest rates structures plays a fundamental role in the fixed income and bond markets. The development of dynamic modeling, especially after Nelson and Siegel (1987) work, parsimonious models based in a few parameter shed light over a new path for the market players. Despite the extensive literature on the term structure of interest rates modeling and the existence in the Brazilian market of various yield curves from different traded asset classes, the literature focused only in the fixed rate curve. In this work we expand the existing literature on modeling the term structure of Brazilian interest rates evaluating all the yield curves of Brazilian market using the methodology proposed by Nelson and Siegel. We use Non Linear Least Squares (NLLS) to estimate the model parameters for almost 10 years of monthly data and model these parameters with the traditional VAR/VEC model. The results show that it is possible to estimate the Nelson Siegel model for the Brazilian curves. It remains for future research the modeling of their variances as well as the possibility to develop a global Brazilian model using Kalman Filter using the Diebold. Li. and Yue (2006) approach.

scholarly journals COVID-19 and Fiscal Policy in the Euro Area

2020 ◽  
Author(s):  
F. Busetto ◽  
Alfonso Dufour ◽  
Simone Varotto
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Euro Area ◽  
Financial Stability ◽  
Yield Curves ◽  
Fiscal Constraints ◽  
Debt Levels

In this chapter we document fiscal policy developments in the main euro area economies over the last two decades and highlight the dramatic changes triggered by the COVID-19 pandemic. We analyse how euro area yield curves respond to COVID-19 related expectations of fiscal expansion. We show how fiscal constraints may affect interest rates. Upward pressure on national yields from higher debt levels could compromise fiscal and financial stability in the long-term.

scholarly journals Title: analysis of term structure of interest rates in Latin America countries from 2006 to 2014

2015 ◽  
Vol 13 (4) ◽  
pp. 650
Author(s):  
Felipe Stona ◽  
Jean Amann ◽  
Maurício Delago Morais ◽  
Divanildo Triches ◽  
Igor Clemente Morais
Keyword(s):  
Latin America ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Principal Component ◽  
Vector Model ◽  
Yield Curves ◽  
Macroeconomic Factors ◽  
The Relationship ◽  
Latin America Countries

This article aims to investigate the relationship between the term structure of interest rates and macroeconomic factors in selected countries of Latin America, such as Brazil, Chile and Mexico, between 2006 and 2014, on an autoregressive vector model. Specifically, we perform estimations of Nelson-Siegel, Diabold-Li and principal component analysis to test how the change of macroeconomic factors, e.g. inflation, production and unemployment levels affect the yield curves. For Brazil and Mexico, GDP and inflation variables are relevant to change the yield curves, with the former shifting more the level, and the latter with greater influence on the slope. For Chile, inflation had the greatest impact on the level and, specifically for Mexico, the unemployment variable also changed the slope of the yield curve.

scholarly journals A regression and comparative study of United States and South African yield curves using principal component analysis

2018 ◽  
Vol 21 (1) ◽  
Author(s):  
Kavir Patel ◽  
Ashfaaq Mohamed ◽  
Gary W. Van Vuuren
Keyword(s):  
United States ◽  
Principal Component Analysis ◽  
Interest Rates ◽  
South African ◽  
Yield Curve ◽  
Principal Component ◽  
Component Analysis ◽  
The United States ◽  
Yield Curves ◽  
Analysis Technique

Volatile markets and economic environments can significantly distort the shape and smoothness of yield curve movements. This study explores the influence of movements in United States interest rates on South African interest rates. This study aims to identify the main underlying movements present in the United States and South African yield curves and to further determine the dominant factors that are responsible for driving South African interest rate movements. The principal settings for the study were the United States and South African markets representing, respectively, a developed and developing market. Principal component analysis was used to discern the major drivers of developing and developed market interest rates. The findings show that the principal component analysis technique is able to effectively classify and quantify the movements of yield curves across both markets in terms of three main factors, namely level, slope and curvature shifts. During certain periods, South African yield curve changes were largely driven by variations in United States interest rates and the rand/dollar exchange rate. Results also demonstrated that a volatile market and economic environment can significantly distort the shape and smoothness of yield curve movements.

Sign in / Sign up

Export Citation Format

Share Document