Parsimonious modeling and forecasting of corporate yield curve

Yu, Wei-Choun; Salyards, Donald M.

doi:10.1002/for.1092

Cited by 18 publications

(8 citation statements)

References 19 publications

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“…Only in the case of Australia do we obtain a parameter equal to that used in the Diebold & Li (2006) paper. This not only supports the arguments of Yu & Salyards (2009), but also justifies our decision to estimate for each country individually vii .…”

Section: Insert Table 1 and Figuresupporting

confidence: 82%

“…A decay parameter of 0.0609 is equivalent to maximising the curvature, or medium-term factor, at 30 months. Yu & Salyards (2009), however, illustrate using a sample of both investment-grade and speculativegrade bonds, that the optimal value of can vary substantially for different set of bonds. Figure 1 demonstrates how the factor loadings in the model can be affected by the choice of .…”

Section: Interest Rate Data and Transformationsmentioning

confidence: 98%

“…In light of this variation we evaluate the underlying model separately for each country, in line with the approach adopted by Yu & Salyards (2009) vi . Firstly, we estimate the model using different values of .…”

Section: Insert Table 1 and Figurementioning

confidence: 99%

See 2 more Smart Citations

Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study

Akimov

Stevenson

Zagonov

2015

J Real Estate Finan Econ

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Using a variation of the Nelson-Siegel term structure model we examine the sensitivity of real estate securities in six key global markets to unexpected changes in the level, slop and curvature of the yield curve. Our results confirm the time-sensitive nature of the exposure and sensitivity to interest rates and highlight the importance of considering the entire term structure of interest rates. One issue that is of particular of interest is that despite the 2007-9 financial crisis the importance of unanticipated interest rate risk weakens post 2003. Although the analysis does examine a range of markets the empirical analysis is unable to provide definitive evidence as to whether REIT and property-company markets display heightened or reduced exposure. Keywords securitised real estate, interest rate risk, yield curve modeling * The authors greatly appreciate the comments of the anonymous referees whose comments substantially improved the paper.

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Section: Insert Table 1 and Figuresupporting

confidence: 82%

Section: Interest Rate Data and Transformationsmentioning

confidence: 98%

See 1 more Smart Citation

Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study

Akimov

Stevenson

Zagonov

2015

J Real Estate Finan Econ

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“…In contrast to the oil market, literature is more extensive in forecasting yield curves. Diebold and Li () extract the level, slope, and curvature factors and extend the Nelson–Siegel yield curve to a dynamic model, able to generate encouraging prediction results, especially for longer horizons (see also Moench, ; Yu & Salyards, ).…”

Section: Forecasting the Futures Curves Dynamicsmentioning

confidence: 99%

Petroleum Term Structure Dynamics and the Role of Regimes

Nomikos

Pouliasis

2014

Journal of Futures Markets

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This study investigates the dependence structure between correlated petroleum forward curves. After decomposing the term structure into level, slope, and curvature shocks we develop a flexible multi-regime error-correction factor model of the dynamics of the joint evolution of commodity pairs' curves. Volatilities and disequilibria across regimes are markedly different whereas the information content of the suggested framework is also tested in forecasting and value-at-risk experiments. The findings of this study have important implications for energy trading and risk management being particularly useful for predicting short-term spreads and the correlation matrix among traded contracts.

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“…The parsimonious Nelson–Siegel model provides good forecastability of the yield curve (see e.g. Diebold and Li, ; Vicente and Tabak, ; Yu and Salyards, ), and follows Zellner's () ‘KISS’ (i.e. keep it sophisticatedly simple) principle of forecasting.…”

Section: Introductionmentioning

confidence: 99%

The Sovereign Yield Curve and the Macroeconomy in China

Yan

Guo

2015

Pacific Economic Review

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A dynamic Nelson-Siegel model is adopted to estimate three time-varying factors of yield curves, the level, the slope and the curvature, and a vector autoregressive model is built to study interactions between macro variables and the yield curve. Results show that, first, money supply growth is a more effective instrument to curb inflation than the monetary policy interest rate; however, the central bank also adjusts the interest rate to stabilize money supply. Second, investment is an important measure to stimulate the Chinese economy, but it also pushes up money supply growth, which results in higher inflation. Third, the yield curve reacts significantly to innovations to investment growth and money supply growth. The segmentation of China's bond market hinders the efficient implementation of monetary policy, and the monetary policy transmission mechanism is still weak in China. Finally, interactions between the yield curve and the macroeconomy in China are nearly unidirectional. Macroeconomic variables reshape the yield curve, but direct adjustments of the yield curve do not significantly change macroeconomic variables. Due to the incomplete liberalization of financial markets, there exists a wide disjunction between the real economy and financial markets in China.

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Parsimonious modeling and forecasting of corporate yield curve

Cited by 18 publications

References 19 publications

Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study

Public Real Estate and the Term Structure of Interest Rates: A Cross-Country Study

Petroleum Term Structure Dynamics and the Role of Regimes

The Sovereign Yield Curve and the Macroeconomy in China

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