scholarly journals Forecasting Term Structure of Interest Rates in Japan

2019 ◽  
Vol 7 (3) ◽  
pp. 39 ◽  
Author(s):  
Ishii
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Term Structure ◽  
Bond Markets ◽  
Forecast Horizon ◽  
Forecast Performance ◽  
Crisis Period ◽  
Long Period ◽  
The U.S ◽  
Dns Model

In this paper, we examined and compared the forecast performances of the dynamic Nelson–Siegel (DNS), dynamic Nelson–Siegel–Svensson (DNSS), and arbitrage-free Nelson–Siegel (AFNS) models after the financial crisis period. The best model for the forecast performance is the DNSS model in the middle and long periods. The AFNS is inferior to the DNS model for long-period forecasting. In U.S. bond markets, AFNS is shown to be superior to DNS in the U.S. However, for Japanese data, there is no evidence that the AFNS is superior to the DNS model in the long forecast horizon.

The Financial Crisis

2019 ◽  
pp. 1-12
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Economic Impact ◽  
Free Fall ◽  
Regulatory Framework ◽  
Subprime Lending ◽  
Crisis Period ◽  
The U.S ◽  
Trump Administration

This chapter discusses the origins of the 2007 financial crisis, subprime lending, and government-sponsored entities. It argues that the events driving financial markets to the precipice of collapse during the global financial meltdown gave rise to a regulatory framework that may have been a rational response to a market in free fall, but need to be reassessed in an era of recovery. In 2018, the U.S. economy may be, by many measures, viewed as wholly recovered from the economic impact of the crisis. The stock market is trading at record highs, having erased all the losses of the crisis period and then some. With this recovery, the Trump administration seeks to restrain the regulatory burden imposed during the crisis.

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.

scholarly journals Does Forward Guidance Matter in Small Open Economies? Examples from Europe

2019 ◽  
Vol 4 (1) ◽  
pp. 1-26
Author(s):  
Jakub Rybacki
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Open Economies ◽  
Central Banks ◽  
Small Open Economies ◽  
Forecast Horizon ◽  
The Czech Republic ◽  
Forward Guidance ◽  
European Economies

The effect of forward guidance on interest rate expectations in small, open economies is often described as heterogeneous. There are examples when financial markets adjusted term structure to reflect interest rate forecasts provided in the projections published by the central banks. On the other hand, medium-term expectations can persistently deviate from trajectories presented by decision-makers, influenced by foreign monetary policy. Our aim is to find the maximal forecast horizon where the domestic forward guidance of local banks in European economies affects market interest rate expectations strongly as compared to the ECB policy. We analyzed the term structure of interest rates in Sweden, Norway, and the Czech Republic. Central banks in these three economies provide the most mature forward guidance, e.g., regularly publishing interest rate forecasts with detailed discussions. The three-month interbank rate path calculated with the Nelson-Siegel model was contrasted with both the trajectory of policy rates presented in central bank projections and that implied by the three-month EURIBOR. We found that interest rate expectations were more influenced by ECB policy than by domestic assumptions when the forecast horizon exceeds four quarters.

Financial Crisis American Style

2009 ◽  
Vol 8 (3) ◽  
pp. 146-170 ◽  
Author(s):  
Barry Bosworth ◽  
Aaron Flaaen
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
The United States ◽  
Mortgage Market ◽  
Secondary Market ◽  
Domestic Investment ◽  
Regulatory Structure ◽  
Public Deficit ◽  
Export Sector ◽  
The U.S

This paper reviews some of the research on the causes of the financial crisis of 2008–09, highlights the key events that triggered a financial panic in September 2008, and summarizes the key policy actions that the United States has taken to ameliorate the crisis. We document the characteristics and growth of the sub-prime mortgage market, and the distorted incentives and flawed regulatory structure surrounding the secondary market for mortgage-backed securities. We also assess the role for macroeconomic determinants of the crisis that serve to explain the bubble in U.S. asset prices, most notably low global interest rates attributed to either loose monetary policy or excess global saving. Although low global interest rates may have contributed to the boom in housing markets and speculative excesses, we believe that the financial innovations and microeconomic distortions played a more fundamental role. Finally, a recovery marked by higher private saving, weak domestic investment, and a large public deficit appears to be unsustainable. Ultimately, the U.S. economy will need to shift about 3 percent of GDP from domestic consumption to the export sector. This will pose some serious challenges to Asian economies that have come to rely on exports to the U.S. market.

Information in the U.S. Treasury Term Structure of Interest Rates

2010 ◽  
Author(s):  
Robert E. Brooks ◽  
Brandon N. Cline ◽  
Walter Enders
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
The U.S

scholarly journals Some Lessons from the Yield Curve

1995 ◽  
Vol 9 (3) ◽  
pp. 129-152 ◽  
Author(s):  
John Y Campbell
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Bond Market ◽  
Expectations Hypothesis ◽  
Expectation Hypothesis ◽  
Maturity Structure ◽  
Short And Long Term ◽  
The U.S

This paper reviews the literature on the relation between short- and long-term interest rates. It summarizes the mixed evidence on the expectation hypothesis of the term structure: when long rates are high relative to short rates, short rates tend to rise as implied by the expectations hypothesis, but long rates tend to fall, which is contrary to the expectations hypothesis. The paper discusses the response of the U.S. bond market to shifts in monetary policy in the spring of 1994 and reviews the debate over the optimal maturity structure of the U.S. government debt.

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.

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