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An Assessment of Estimates of Term Structure Models for the United States

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  • Mr. Carlos I. Medeiros
  • Ying He

Abstract

The paper assesses estimates of term structure models for the United States. To this end, this paper first describes the mathematics underlying two types of term structure models, namely the Nelson-Siegel and Cox, Ingersoll and Ross family of models, and the estimation techniques. It then presents estimations of some of specific models within these families of models?three-factor Nelson-Siegel Model, four-factor Svensson model, and preference-free, two-factor Cox, Ingersoll and Roll model?for the United States from 1972 to mid 2011. It subsequently provides an assessment of the estimations. It concludes that these estimations of the term structure models successfully capture the dynamics of the term structure in the United States.

Suggested Citation

  • Mr. Carlos I. Medeiros & Ying He, 2011. "An Assessment of Estimates of Term Structure Models for the United States," IMF Working Papers 2011/247, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/247
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    References listed on IDEAS

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    1. Francis X. Diebold & Monika Piazzesi & Glenn D. Rudebusch, 2005. "Modeling Bond Yields in Finance and Macroeconomics," American Economic Review, American Economic Association, vol. 95(2), pages 415-420, May.
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    3. Mr. Marco Rodriguez Waldo & Mr. Carlos I. Medeiros, 2011. "The Dynamics of the Term Structure of Interest Rates in the United States in Light of the Financial Crisis of 2007–10," IMF Working Papers 2011/084, International Monetary Fund.
    4. Qiang Dai & Kenneth J. Singleton, 2000. "Specification Analysis of Affine Term Structure Models," Journal of Finance, American Finance Association, vol. 55(5), pages 1943-1978, October.
    5. Richard Dennis & Glenn D. Rudebusch, 2003. "Finance and macroeconomics," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may2.
    6. International Monetary Fund, 2010. "On the Estimation of Term Structure Models and An Application to the United States," IMF Working Papers 2010/258, International Monetary Fund.
    7. Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006. "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 309-338.
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