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Long-horizon yield curve projections: comparison of semi-parametric and parametric approaches

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  • Ken Nyholm
  • Riccardo Rebonato

Abstract

Two methods for evolving forward the yield curve are evaluated and contrasted within a Monte Carlo experiment: one is originally presented by Rebonato et al. (2005) and the other by Bernadell et al. (2005). A detailed account for how to implement the models is also presented. Results suggest that the two techniques are complementary and able to capture important cross-sectional and time-series properties of observed yield curve data. Our results are of interest to practitioners in the financial markets as well as central banks who need accountable and history consistent procedures for generating long-term yield curve forecasts.

Suggested Citation

  • Ken Nyholm & Riccardo Rebonato, 2008. "Long-horizon yield curve projections: comparison of semi-parametric and parametric approaches," Applied Financial Economics, Taylor & Francis Journals, vol. 18(20), pages 1597-1611.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:20:p:1597-1611
    DOI: 10.1080/09603100701630048
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    Cited by:

    1. Phillip Daves & Michael Ehrhardt, 2011. "Creating a synthetic after-tax zero-coupon bond using US Treasury STRIP bonds: implications for the true after-tax spot rate," Applied Financial Economics, Taylor & Francis Journals, vol. 21(10), pages 695-705.
    2. Cem Çakmakli, 2012. "Bayesian Semiparametric Dynamic Nelson-Siegel Model," Working Paper series 59_12, Rimini Centre for Economic Analysis, revised Sep 2012.

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