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Adaptive forecasting of the EURIBOR swap term structure

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Author Info

  • Oliver Blaskowitz

    (Institute of Statistics and Econometrics, Humboldt-Universität zu Berlin, Germany)

  • Helmut Herwartz

    (Institute of Statistics and Econometrics, Christian-Albrechts-Universität zu Kiel, Germany)

Abstract

In this paper we adopt a principal components analysis (PCA) to reduce the dimensionality of the term structure and employ autoregressive (AR) models to forecast principal components which, in turn, are used to forecast swap rates. Arguing in favour of structural variation, we propose data-driven, adaptive model selection strategies based on the PCA|AR model. To evaluate ex ante forecasting performance for particular rates, distinct forecast features, such as mean squared errors, directional accuracy and directional forecast value, are considered. It turns out that, relative to benchmark models, the adaptive approach offers additional forecast accuracy in terms of directional accuracy and directional forecast value. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1121
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 28 (2009)
Issue (Month): 7 ()
Pages: 575-594

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Handle: RePEc:jof:jforec:v:28:y:2009:i:7:p:575-594

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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Citations

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Cited by:
  1. Blaskowitz, Oliver & Herwartz, Helmut, 2014. "Testing the value of directional forecasts in the presence of serial correlation," International Journal of Forecasting, Elsevier, vol. 30(1), pages 30-42.
  2. Axel Groß-Klußmann & Nikolaus Hautsch, 2011. "Predicting Bid-Ask Spreads Using Long Memory Autoregressive Conditional Poisson Models," SFB 649 Discussion Papers SFB649DP2011-044, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Blaskowitz, Oliver & Herwartz, Helmut, 2011. "On economic evaluation of directional forecasts," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1058-1065, October.
  4. Bergmeir, Christoph & Costantini, Mauro & Benítez, José M., 2014. "On the usefulness of cross-validation for directional forecast evaluation," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 132-143.
  5. Dauwe, Alexander & Moura, Marcelo L., 2011. "Forecasting the term structure of the Euro Market using Principal Component Analysis," Insper Working Papers wpe_233, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.

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