Research Article
Modeling and Forecasting the Yield Curve by an Extended Nelson‐Siegel Class of Models: A Quantile Autoregression Approach
ABSTRACT
This paper compares the in‐sample fitting and the out‐of‐sample forecasting performances of four distinct Nelson–Siegel class models: Nelson–Siegel, Bliss, Svensson, and a five‐factor model we propose in order to enhance the fitting flexibility. The introduction of the fifth factor resulted in superior adjustment to the data. For the forecasting exercise the paper contrasts the performances of the term structure models in association with the following econometric methods: quantile autoregression evaluated at the median, VAR, AR, and a random walk. As a pattern, the quantile procedure delivered the best results for longer forecasting horizons. Copyright © 2011 John Wiley & Sons, Ltd.
Citing Literature
Number of times cited according to CrossRef: 11
- Won Joong Kim, Gunho Jung, Sun-Yong Choi, Forecasting CDS Term Structure Based on Nelson–Siegel Model and Machine Learning, Complexity, 10.1155/2020/2518283, 2020, (1-23), (2020).
- Alessia Cafferata, Pier Giuseppe Giribone, Marco Neffelli, Marina Resta, Yield Curve Estimation Under Extreme Conditions: Do RBF Networks Perform Better?, Neural Advances in Processing Nonlinear Dynamic Signals, 10.1007/978-3-319-95098-3_22, (241-251), (2019).
- Anthony H. Tu, Cathy Yi-Hsuan Chen, A factor-based approach of bond portfolio value-at-risk: The informational roles of macroeconomic and financial stress factors, Journal of Empirical Finance, 10.1016/j.jempfin.2017.11.010, 45, (243-268), (2018).
- Jian Sun, Peter Carr, Bond Yield Curve Convexity Trading, SSRN Electronic Journal, 10.2139/ssrn.3232697, (2018).
- Hokuto Ishii, Modeling and Predictability of Exchange Rate Changes by the Extended Relative Nelson–Siegel Class of Models, International Journal of Financial Studies, 10.3390/ijfs6030068, 6, 3, (68), (2018).
- João F. Caldeira, Guilherme V. Moura, André A.P. Santos, Fabricio Tourrucôo, Forecasting the yield curve with the arbitrage-free dynamic Nelson–Siegel model: Brazilian evidence, EconomiA, 10.1016/j.econ.2016.06.003, 17, 2, (221-237), (2016).
- Julián Andrada-Félix, Adrian Fernandez-Perez, Fernando Fernández-Rodríguez, Fixed income strategies based on the prediction of parameters in the NS model for the Spanish public debt market, SERIEs, 10.1007/s13209-015-0123-4, 6, 2, (207-245), (2015).
- Thomas Q. Pedersen, Predictable Return Distributions, Journal of Forecasting, 10.1002/for.2323, 34, 2, (114-132), (2015).
- João Caldeira, Guilherme V. Moura, Andre A. P. Santos, Measuring Risk in Fixed Income Portfolios Using Yield Curve Models, SSRN Electronic Journal, 10.2139/ssrn.2311721, (2013).
- Rafael Barros de Rezende, Giving Flexibility to the Nelson-Siegel Class of Term Structure Models, SSRN Electronic Journal, 10.2139/ssrn.1290784, (2011).
- Thomas Quistgaard Pedersen, Predictable Return Distributions, SSRN Electronic Journal, 10.2139/ssrn.1658394, (2010).
