Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia
Evolving yield curves in the real-world measures: a semi-parametric approach
Riccardo Rebonato, Sukhdeep Mahal, Mark Joshi, Lars-Dierk Buchholz, Ken Nyholm
Abstract
ABSTRACT
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.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net