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

Author/Editor:

Carlos I. Medeiros ; Ying He

Publication Date:

October 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2011/247

Subject:

Bonds Econometric analysis Factor models Financial institutions Financial regulation and supervision Financial services Market risk Securities Yield curve

English

Publication Date:

October 1, 2011

ISBN/ISSN:

9781463923266/1018-5941

Stock No:

WPIEA2011247

Pages:

31

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