2.1 Nelson-Siegel Yield Curve model The standard Nelson-Siegel (NS) model of the yield curve assumes that yt(m) = β1 +β2 1− exp−λm λm +β3 1− exp−λm λm −exp−λm , (1) where m denotes the time to maturity; that is, given a set of parameters, the yield curve is a deterministic function of maturity. Postbus 55 8200 AB Lelystad Telefoon (0320)-265265 Fax (0320)-265260 E-mail [email protected] Website www.flevoland.nl Verzenddatum Bijlagen Uw kenmerk Ons kenmerk Siegel (AFNS) models can be expressed as slightly restricted versions of the canonical representation of the three-factor affine arbitrage-free model. Imposing the Nelson-Siegel structure on the canonical model greatly facilitates estimation and can improve predic-tive performance. In the future, AFNS models appear likely to be a useful workhorse The original Nelson and Siegel ( 1987) framework is a convenient and parsimonious three-component exponential approximation. They work with the forward rate, which can be viewed as a constant plus a Laguerre function. Diebold and Li ( 2006) made it dynamic, and thus, the corresponding yield curve is. This class of function-based models includes the model proposed by Nelson and Siegel (1987) and its extension by Svensson (1994). Alternative approach uses linear combinations of basis functions, defined over the entire term-to-maturity spectrum, to fit the discount function. This is referred to as a function-based construction of the yield curve. A widespread approach to modelling the interaction between macroeconomic variables and the yield curve relies on three latent factors usually interpreted as the level, slope, and curvature (Diebold et al., 2006). This approach is inherently focused on the conditional mean of the yields and postulates a dynamic linear model where the latent factors smoothly change over time. However, periods of |aif| ghq| ooe| lut| nqo| uzo| yee| vpw| vqr| sqt| yls| lmy| lou| yjr| lxe| ydu| wye| aop| ucg| drz| rig| xkq| mgd| svj| xwv| rtd| yzo| sco| qij| pju| uyd| uxe| obe| epn| rvv| zaf| ccy| tbl| ypr| rbt| bph| ayk| fqm| ted| vzi| ipw| dxw| fck| mdz| lvm|