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Approximating the term structure of interest rates in Japan

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  • Shang-Wu Yu

Abstract

This paper uses B-spline functions to approximate the term structure of interest rates implied in Japanese government bonds. The results indicate that the estimated short rate curve exhibits a slight dip in the long end of the curve. This may be attributed to an excess demand for long-term bonds in general and specifically on the run bonds in the Japanese market.

Suggested Citation

  • Shang-Wu Yu, 1999. "Approximating the term structure of interest rates in Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 403-407.
    • Handle: RePEc:taf:apeclt:v:6:y:1999:i:7:p:403-407
    DOI: 10.1080/135048599352899
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    References listed on IDEAS

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    1. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
    2. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 627-627, November.
    3. Mark Deacon & Andrew Derry, 1994. "Estimating the Term Structure of Interest Rates," Bank of England working papers 24, Bank of England.
    4. Brennan, Michael J. & Schwartz, Eduardo S., 1979. "A continuous time approach to the pricing of bonds," Journal of Banking & Finance, Elsevier, vol. 3(2), pages 133-155, July.
    5. Brown, Roger H. & Schaefer, Stephen M., 1994. "The term structure of real interest rates and the Cox, Ingersoll, and Ross model," Journal of Financial Economics, Elsevier, vol. 35(1), pages 3-42, February.
    6. Woodward, G Thomas, 1990. "The Real Thing: A Dynamic Profile of the Term Structure of Real Interest Rates and Inflation Expectations in the United Kingdom, 1982-89," The Journal of Business, University of Chicago Press, vol. 63(3), pages 373-398, July.
    7. Michael J. Brennan and Eduardo S. Schwartz., 1979. "A Continuous-Time Approach to the Pricing of Bonds," Research Program in Finance Working Papers 85, University of California at Berkeley.
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    Cited by:

    1. Chiu, Nan-Chieh & Fang, Shu-Cherng & Lavery, John E. & Lin, Jen-Yen & Wang, Yong, 2008. "Approximating term structure of interest rates using cubic L1 splines," European Journal of Operational Research, Elsevier, vol. 184(3), pages 990-1004, February.
    2. In, Francis & Batten, Jonathan & Kim, Sangbae, 2003. "What drives the term and risk structure of Japanese bonds?," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 518-541.

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