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Yield Curve Estimation Based on Government Security Prices in the Croatian Financial Market

Author

Listed:
  • Orlović Zrinka

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia.)

  • Zoričić Davor

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia.)

  • Golubić Zrinka Lovretin

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia.)

Abstract

This article investigates the estimation of the yield curve based on government security prices using the Nelson-Siegel model in the Croatian financial market. The yield curve was estimated for samples of government securities with and without currency clauses. Since the Croatian financial market is less developed characterized by limited trading activity in government bonds, Treasury bills were also included in the analysis. To examine the difference in the estimation of yield curve parameters between a less developed and a developed market, the U.S. sample was considered. The yield curve was estimated for the full US sample and for artificially created U.S. samples corresponding to the Croatian samples of government bonds with and without currency clauses. Despite the less developed Croatian financial market, it is possible to estimate the yield curve and derive meaningful economic interpretations from the estimates.

Suggested Citation

  • Orlović Zrinka & Zoričić Davor & Golubić Zrinka Lovretin, 2024. "Yield Curve Estimation Based on Government Security Prices in the Croatian Financial Market," Zagreb International Review of Economics and Business, Sciendo, vol. 27(2), pages 27-41.
    • Handle: RePEc:vrs:zirebs:v:27:y:2024:i:2:p:27-41:n:1002
    DOI: 10.2478/zireb-2024-0016
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    References listed on IDEAS

    as
    1. Ganchev, Alexander, 2009. "Modeling the yield curve of spot interest rates under the conditions in Bulgaria," MPRA Paper 70048, University Library of Munich, Germany.
    2. Zoricic, Davor & Badurina, Marko, 2013. "Nelson-Siegel Yield Curve Model Estimation And The Yield Curve Trading In The Croatian Financial Market," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 4(2), pages 113-125.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Nelson-Siegel model; nonlinear optimization; prices of government securities; U.S. government securities;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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