Journal of Risk

Evolving yield curves in the real-world measures: a semi-parametric approach

Riccardo Rebonato, Sukhdeep Mahal, Mark Joshi, Lars-Dierk Buchholz, Ken Nyholm


In this paper we show how to evolve a yield curve over time horizons of the order of years using a simple but effective semiparametric method. The proposed technique preserves in the limit all the eigenvalues and eigenvectors of the observed changes in yields. It also recovers in a satisfactory way several important statistical features (unconditional variance, serial autocorrelation, distribution of curvatures, eigenvectors) of the real-world data. A simple financial explanation can be provided for the methodology. The possible financial applications are discussed.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here