Forecasting The Us Term Structure Of Interest Rates Using A Macroeconomic Smooth Dynamic Factor Model PDF Download
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Author | : Siem Jan Koopman |
Publisher | : |
Total Pages | : 38 |
Release | : 2014 |
Genre | : |
ISBN | : |
Download Forecasting the U.S. Term Structure of Interest Rates Using a Macroeconomic Smooth Dynamic Factor Model Book in PDF, ePub and Kindle
We extend the class of dynamic factor yield curve models for the inclusion of macro-economic factors. We benefit from recent developments in the dynamic factor literature for extracting the common factors from a large panel of macroeconomic series and for estimating the parameters in the model. We include these factors into a dynamic factor model for the yield curve, in which we model the salient structure of the yield curve by imposing smoothness restrictions on the yield factor loadings via cubic spline functions. We carry out a likelihood-based analysis in which we jointly consider a factor model for the yield curve, a factor model for the macroeconomic series, and their dynamic interactions with the latent dynamic factors. We illustrate the methodology by forecasting the U.S. term structure of interest rates. For this empirical study we use a monthly time series panel of unsmoothed Fama-Bliss zero yields for treasuries of different maturities between 1970 and 2009, which we combine with a macro panel of 110 series over the same sample period. We show that the relation between the macroeconomic factors and yield curve data has an intuitive interpretation, and that there is interdependence between the yield and macroeconomic factors. Finally, we perform an extensive out-of-sample forecasting study. Our main conclusion is that macroeconomic variables can lead to more accurate yield curve forecasts.
Author | : Siem Jan Koopman |
Publisher | : |
Total Pages | : 31 |
Release | : 2011 |
Genre | : |
ISBN | : |
Download Forecasting the U.S. Term Structure of Interest Rates Using a Macroeconomic Smooth Dynamic Factor Model Book in PDF, ePub and Kindle
Author | : Borus Jungbacker |
Publisher | : |
Total Pages | : 56 |
Release | : 2014 |
Genre | : |
ISBN | : |
Download Smooth Dynamic Factor Analysis with Application to the U.S. Term Structure of Interest Rates Book in PDF, ePub and Kindle
We consider the dynamic factor model and show how smoothness restrictions can be imposed on factor loadings by using cubic spline functions. We develop statistical procedures based on Wald, Lagrange multiplier and likelihood ratio tests for this purpose. The methodology is illustrated by analyzing a newly updated monthly time series panel of U.S. term structure of interest rates. Dynamic factor models with and without smooth loadings are compared with dynamic models based on Nelson-Siegel and cubic spline yield curves. We conclude that smoothness restrictions on factor loadings are supported by the interest rate data and can lead to more accurate forecasts.
Author | : Rajna Gibson |
Publisher | : Now Publishers Inc |
Total Pages | : 171 |
Release | : 2010 |
Genre | : Business & Economics |
ISBN | : 1601983727 |
Download Modeling the Term Structure of Interest Rates Book in PDF, ePub and Kindle
Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.
Author | : Borus Jungbacker |
Publisher | : |
Total Pages | : 0 |
Release | : 2009 |
Genre | : |
ISBN | : |
Download Dynamic Factor Models with Smooth Loadings for Analyzing the Term Structure of Interest Rates Book in PDF, ePub and Kindle
Author | : Francis X. Diebold |
Publisher | : Princeton University Press |
Total Pages | : 223 |
Release | : 2013-01-15 |
Genre | : Business & Economics |
ISBN | : 0691146802 |
Download Yield Curve Modeling and Forecasting Book in PDF, ePub and Kindle
Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.
Author | : Borus Martinus Johannes Petrus Jungbacker |
Publisher | : |
Total Pages | : 51 |
Release | : 2009 |
Genre | : |
ISBN | : |
Download Dynamic Factor Models with Smooth Loadings for Analyzing the Term Structure of Interest Rates Book in PDF, ePub and Kindle
Author | : Michiel De Pooter |
Publisher | : |
Total Pages | : 49 |
Release | : 2010 |
Genre | : |
ISBN | : |
Download Term Structure Forecasting Using Macro Factors and Forecast Combination Book in PDF, ePub and Kindle
Author | : Michael P. Clements |
Publisher | : OUP USA |
Total Pages | : 732 |
Release | : 2011-07-08 |
Genre | : Business & Economics |
ISBN | : 0195398645 |
Download The Oxford Handbook of Economic Forecasting Book in PDF, ePub and Kindle
Greater data availability has been coupled with developments in statistical theory and economic theory to allow more elaborate and complicated models to be entertained. These include factor models, DSGE models, restricted vector autoregressions, and non-linear models.
Author | : Liuren Wu |
Publisher | : |
Total Pages | : 39 |
Release | : 2006 |
Genre | : |
ISBN | : |
Download Systematic Movements in Macroeconomic Releases and the Term Structure of Interest Rates Book in PDF, ePub and Kindle
In this paper, we study the fundamental relation between the numerous macroeconomic releases and the term structure of interest rates via a dynamic factor model. We use two dynamic factors to extract the systematic information from a wide array of noisy and sparsely observed macroeconomic releases, and then link the two factors to the daily term structure of interest rates using no-arbitrage arguments. The two dynamic factors can predict over 76 percent of the daily variation in LIBOR and swap rates across all maturities from one month to ten years. Inflation-related releases have large and positive impacts on interest rates of all maturities. Shocks on these releases lead to parallel shifts on the yield curve. In contrast, shocks on many employment and output related releases generate a slope effect on the term structure. Upward shocks on these variables tend to flatten an otherwise upward sloping yield curve. The estimated factor dynamics and market prices of factor risks provide further insight on the fundamental reasons behind the different term structure impacts from different macroeconomic releases.