A Comparative Analysis of Parsimonious Yield Curve Models with Focus on the Nelson-Siegel, Svensson and Bliss Versions
Journal
Computational Economics
ISSN
0927-7099
Type
forthcoming
Date Issued
2021-04-15
Author(s)
Abstract (De)
We shed light on computational challenges when fitting the Nelson-Siegel, Bliss and Svensson parsimonious yield curve models to observed US Treasury securities with maturities up to 30 years. As model parameters have a specific financial meaning, the stability of their estimated values over time becomes relevant when their dynamic behavior is interpreted in risk-return models. Our study is the first in the literature that compares the stability of estimated model parameters among different parsimonious models and for different approaches for predefining initial parameter values. We find that the Nelson-Siegel parameter estimates are more stable and conserve their intrinsic economical interpretation. Results reveal in addition the patterns of confounding effects in the Svensson model. To obtain the most stable and intuitive parameter estimates over time, we recommend the use of the Nelson-Siegel model by taking initial parameter values derived from the observed yields. The implications of excluding Treasury bills, constraining parameters and reducing clusters across time to maturity are also investigated.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Publisher
Springer Science + Business Media B.V.
Contact Email Address
michael.schuerle@unisg.ch
Eprints ID
263009