Modeling and Forecasting the Yield Curve by an Extended Nelson-Siegel Class of Models: A Quantile Autoregression Approach

Rezende, de; Barros, R. F.

doi:10.2139/ssrn.1290741

Cited by 10 publications

(6 citation statements)

References 34 publications

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“…The capability of generating profits by means of these yield curve predictions, transforming them into technical trading strategies, is also considered. By re-interpreting the Nelson-Siegel yield curve as a dynamic model that achieves a reduction in dimensionality, the factors level, slope and curvature are predicted using different econometric models, namely the parametric ones suggested by Diebold and Li (2006) and Rezende and Ferreira (2013), and two non-parametric models suggested by Fernández-Rodríguez et al (1999) for exchange rates. Our findings show that the random walk model is competitive from the standpoint of point predictions for Spanish yield curves.…”

Section: Discussionmentioning

confidence: 99%

“…The econometric models used in these predictions are those developed in Diebold and Li (2006) and Rezende and Ferreira (2013) for forecasting the Brazilian zerocoupon data, and in other non-parametric models successfully employed in the prediction of exchange rates by Fernández-Rodríguez et al (1999). Using the Diebold and Li (2006) notation,β i,t , i = 1, 2, 3 represents the beta corresponding to day t, andβ i,t+h/t represents the prediction ofβ i,t h days ahead.…”

Section: Methodology and Datamentioning

confidence: 99%

“…So, we follow Rezende and Ferreira (2013), which use QAR method while comparing the predictive power of NS class of models with Brazilian zero-coupon data. Contrasting with QAR model is interesting due to its robustness to the presence of outliers and extreme values.…”

Section: Methodology and Datamentioning

confidence: 99%

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Fixed income strategies based on the prediction of parameters in the NS model for the Spanish public debt market

Félix

Fernández-Pérez

Rodríguez

2015

SERIEs

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Using different econometric models, Diebold and Li (J Econom 130:337-364, 2006) addressed the practical problem of forecasting the yield curve by predicting the factors level, slope and curvature in the Nelson-Siegel framework. This paper has two main aims: on the one hand, to investigate the predictive possibilities of the yield curve for the Spanish public debt market, using the methodology proposed by Diebold and Li (J Econom 130:337-364, 2006); and on the other hand, to study the capability of generating profits by transforming these yield curve predictions into technical trading strategies. The Sharpe ratios of our strategies outperform the hedging strategy benchmarks for long (1 year) horizons in our prediction period (2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010) and also for the current crisis period (2008)(2009)(2010). Nevertheless, these strategies do not outperform their benchmarks for short (1 month) horizons. The introduction of nonparametric models improves the profitability of the strategies in terms of the Sharpe ratio, especially in the 1-year-ahead predictions. This finding is in line with Diebold and Li (J Econom 130:337-364, 2006), whose forecasts for long horizons are much more accurate than those of several standard benchmark models.

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Section: Discussionmentioning

confidence: 99%

Section: Methodology and Datamentioning

confidence: 99%

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Fixed income strategies based on the prediction of parameters in the NS model for the Spanish public debt market

Félix

Fernández-Pérez

Rodríguez

2015

SERIEs

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“…The modified multistate model for marriage reverse annuity contract is based on four states: both spouses are alive (1), husband is dead (2), wife is dead (3), both spouses are dead (4) is determined by the (7) formula. It is easy to notice that the benefit is the smallest for the reverse mortgage for all n .…”

Section: The Marriage Model Of Reverse Annuity Contractsmentioning

confidence: 99%

Comparison of Reverse Annuity Contract and Reverse Mortgage on the Polish Market

Dębicka¹,

Marciniuk²

2014

International Scientific Conference

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“… 3 The use of quantile regression to analyze financial markets has increased a lot during recent years. For example, Engle & Manganelli () analyze the conditional value‐at‐risk by quantile regression, Chuang et al () investigate the causal relations between stock return and trading volume based on quantile regressions, Chiang & Li () use quantile regression to analyze the risk–return relation over the entire stock return distribution, Baur et al () and Cai et al () use quantile autoregression to study the dependence pattern of stock returns and De Rezende & Ferreira () use quantile regression in yield curve forecasting.…”

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confidence: 99%

Predictable Return Distributions

Pedersen

2015

Journal of Forecasting

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Using quantile regression this paper explores the predictability of the stock and bond return distributions as a function of economic state variables. The use of quantile regression allows us to examine specific parts of the return distribution such as the tails and the center, and for a sufficiently fine grid of quantiles we can trace out the entire distribution. A univariate quantile regression model is used to examine the marginal stock and bond return distributions, while a multivariate model is used to capture their joint distribution. An empirical analysis on US data shows that economic state variables predict the stock and bond return distributions in quite different ways in terms of, for example, location shifts, volatility and skewness. Comparing the different economic state variables in terms of their out-of-sample forecasting performance, the empirical analysis also shows that the relative accuracy of the state variables varies across the return distribution. Density forecasts based on an assumed normal distribution with forecasted mean and variance is compared to forecasts based on quantile estimates and, in general, the latter yields the best performance. Copyright

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Modeling and Forecasting the Yield Curve by an Extended Nelson-Siegel Class of Models: A Quantile Autoregression Approach

Cited by 10 publications

References 34 publications

Fixed income strategies based on the prediction of parameters in the NS model for the Spanish public debt market

Fixed income strategies based on the prediction of parameters in the NS model for the Spanish public debt market

Comparison of Reverse Annuity Contract and Reverse Mortgage on the Polish Market

Predictable Return Distributions

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