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Nelson-Siegel Yield Curve Model Estimation And The Yield Curve Trading In The Croatian Financial Market

Author

Listed:
  • Zoricic, Davor

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

  • Badurina, Marko

    (Global Markets Division Deputy Manager, Zagreb, Croatia)

Abstract

The paper examines the possibility of yield curve estimation in the illiquid Croatian financial market using the parametric Nelson-Siegel model. Furthermore bond trading strategies are being discussed regarding the estimated model parameters. Research findings suggest a minimum of 5 data points per observation in order to obtain Nelson-Siegel parameters. The evolution of the parameters seems to be in line with macroeconomic theory considering the state of Croatian economy in the analyzed period. This is especially true in the case of pure kuna instruments sample while some peculiarities have been detected in the sample referring to the euro denominated instruments. However further research should be conducted regarding the applicability of the model for the yield curve trading purposes due to market’s illiquidity.

Suggested Citation

  • 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.
    • Handle: RePEc:ris:utmsje:0073
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    Citations

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    Cited by:

    1. Dolinar, Denis & Orsag, Silvije & Suman, Paola, 2015. "Test Of The Chen-Roll-Ross Macroeconomic Factor Model: Evidence From Croatian Stock Market," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 6(2), pages 185-196.
    2. Tomasz Piotr Kostyra & Michał Rubaszek, 2020. "Forecasting the Yield Curve for Poland," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 5(2), pages 103-117, December.

    More about this item

    Keywords

    yield curve model; bond trading strategies;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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