Term structure models and the zero bound: An empirical investigation of Japanese yields

Kim, Don H.; Singleton, Kenneth J.

doi:10.1016/j.jeconom.2011.12.005

Cited by 232 publications

(185 citation statements)

References 38 publications

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“…Instead, we use the extended Kalman filter as in Kim and Singleton (2012). Furthermore, to make the fitted errors comparable across bonds of various maturities, we scale each bond price by its duration, which is calculated before estimation.…”

Section: The Dynamic Nelson-siegel Modelmentioning

confidence: 99%

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Christensen¹,

López²,

Mussche³

2019

ERWP

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Insurance companies and pension funds have liabilities far into the future and typically well beyond the longest maturity bonds trading in fixed-income markets. Such longlived liabilities still need to be discounted, and yield curve extrapolations based on the information in observed yields can be used. We use dynamic Nelson-Siegel (DNS) yield curve models for extrapolating risk-free yield curves for Switzerland, Canada, France, and the U.S. We find slight biases in extrapolated long bond yields of a few basis points. In addition, the DNS model allows the generation of useful financial risk metrics, such as ranges of possible yield outcomes over projection horizons commonly used for stress-testing purposes. Therefore, we recommend using DNS models as a simple tool for generating extrapolated yields for long-term interest rate risk management.JEL Classification: E43, E47, G12, G22, G28

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Section: The Dynamic Nelson-siegel Modelmentioning

confidence: 99%

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Christensen¹,

López²,

Mussche³

2019

ERWP

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“…19 Following Kim and Singleton (2012), the prefix "B-" refers to a shadow-rate model in the spirit of Black (1995).…”

Section: A Shadow-rate Modelmentioning

confidence: 99%

Term Structure Analysis with Big Data

Andreasen¹,

Christensen²,

Rudebusch³

2017

ERWP

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Analysis of the term structure of interest rates almost always takes a two-step approach.First, actual bond prices are summarized by interpolated synthetic zero-coupon yields, and second, a small set of these yields are used as the source data for further empirical examination. In contrast, we consider the advantages of a one-step approach that directly analyzes the universe of bond prices. To illustrate the feasibility and desirability of the onestep approach, we compare arbitrage-free dynamic term structure models estimated using both approaches. We also provide a simulation study showing that a one-step approach can extract the information in large panels of bond prices and avoid any arbitrary noise introduced from a first-stage interpolation of yields.JEL Classification: C55, C58, G12, G17

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“…This leads to quadratic-Gaussian term structure models (Ahn et al 2002 andLeippold andWu (2003)) where the solution for yields is a linear-quadratic function of x t . Kim and Singleton (2011) provide an empirical study of nominal yields in Japan between 1995 and 2008. They show that the behaviour of yields is qualitatively different in this period.…”

Section: The Challenges Aheadmentioning

confidence: 99%

Estimating the policy rule from money market rates when target rate changes are lumpy

Fontaine

2014

Developments in Macro-Finance Yield Curve Modelling

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Term structure models and the zero bound: An empirical investigation of Japanese yields

Cited by 232 publications

References 38 publications

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Term Structure Analysis with Big Data

Estimating the policy rule from money market rates when target rate changes are lumpy

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