The Affine Arbitrage-free Class of Nelson-Siegel Term Structure Models
Author | : Jens H. E. Christensen |
Publisher | : |
Total Pages | : 54 |
Release | : 2007 |
ISBN-10 | : PSU:000061570665 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book The Affine Arbitrage-free Class of Nelson-Siegel Term Structure Models written by Jens H. E. Christensen and published by . This book was released on 2007 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive the class of arbitrage-free affine dynamic term structure models that approximate the widely-used Nelson-Siegel yield-curve specification. Our theoretical analysis relates this new class of models to the canonical representation of the three-factor arbitrage-free affine model. Our empirical analysis shows that imposing the Nelson-Siegel structure on this canonical representation greatly improves its empirical tractability; furthermore, we find that improvements in predictive performance are achieved from the imposition of absence of arbitrage.