IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v7y2019i1p1582319.html
   My bibliography  Save this article

A cross-sectional application of the Nelson-Siegel-Svensson model to several negative yield cases

Author

Listed:
  • Maria Teresa Medeiros Garcia
  • Vítor Hugo Ferreira Carvalho

Abstract

The appearance of negative bond yields presents significant challenges for the fixed income markets, which mainly concern related forecasting models. The Nelson-Siegel-Svensson model (NSS) is one of the models that is most frequently used by central banks to estimate the term structure of interest rates. The objective of this study is to evaluate the application of the NSS model to fit the yield curve of a set of 20 countries, the majority from the Eurozone, which registered negative sovereign bond yields. We conclude that the model adjusted well for all countries’ yield curves, although no changes or constraints were introduced. In addition, a comparison was carried out between market instantaneous interest rate and the interest rate for the very distant future, which the model can predict, with good results for the instantaneous interest rate. An evaluation of the possible behaviour of shared debt securities (i.e. Eurobonds) was also analysed. In conclusion, the NSS model seems to remain a valuable, easy to use, and adaptable tool, to fit negative yield curves, for monetary policy institutions and market players alike.

Suggested Citation

  • Maria Teresa Medeiros Garcia & Vítor Hugo Ferreira Carvalho, 2019. "A cross-sectional application of the Nelson-Siegel-Svensson model to several negative yield cases," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1582319-158, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1582319
    DOI: 10.1080/23322039.2019.1582319
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2019.1582319
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/23322039.2019.1582319?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ewa Dziwok & Marta A. Karaś, 2021. "Systemic Illiquidity Noise-Based Measure—A Solution for Systemic Liquidity Monitoring in Frontier and Emerging Markets," Risks, MDPI, vol. 9(7), pages 1-29, July.
    2. Mmakganya Mashoene & Mishelle Doorasamy & Rajendra Rajaram, 2021. "The application of different term-structure models to estimate South African real spot rate curve," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 21-36, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1582319. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.