Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86192
Authors: 
Koopman, Siem Jan
Mallee, Max I.P.
van der Wel, Michel
Year of Publication: 
2007
Series/Report no.: 
Tinbergen Institute Discussion Paper 07-095/4
Abstract: 
In this discussion paper we introduce time-varying parameters in the dynamic Nelson–Siegel yield curve model for the simultaneous analysis and forecasting of interest rates of different maturities. The Nelson–Siegel model has been recently reformulated as a dynamic factor model with vector autoregressive factors. We extend this framework in two directions. First, the factor loadings in the Nelson–Siegel yield model depend on a single loading parameter that we treat as the fourth latent factor. Second, we specify the overall volatility as a generalized autoregressive conditional heteroscedasticity (GARCH) process. We present empirical evidence of considerable increases in within-sample goodness of fit for these advances in the dynamic Nelson–Siegel model.
Subjects: 
Yield Curve
Time-varying Volatility
Spline Functions
Kalman Filter
Missing Values
JEL: 
C32
C51
E43
Document Type: 
Working Paper

Files in This Item:
File
Size
507.09 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.