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MultiATSM: An R Package for Arbitrage-free Multicountry Affine Term Structure of Interest Rates Models with Unspanned Macroeconomic Risk

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  • Moura, Rubens

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

Abstract

The R package MultiATSM provides several estimation routines and additional outputs for eight classes of affine term structure of interest rates models (ATSMs). All the ATSMs from this package build on the single-country unspanned macroeconomic risk framework by Joslin, Priebsch, and Singleton (2014). The MultiATSM package also features alternative multicountry extensions based on the settings of Jotikasthira, Le, and Lundblad (2015), which imposes the existence of a dominant (global) economy, and Candelon and Moura (2021), where the joint dynamics of the risk factors are captured by a GVAR setup. For each ATSM, the MultiATSM package produces a set of model outputs that includes: (i) the graphical representations from the model fit, the orthogonalized and generalized versions of impulse response and forecast error variance decomposition from bond yields and risk factors; (ii) a number of bootstrap procedures for constructing confidence intervals, and (iii) out-of-sample forecasting of bond yields.

Suggested Citation

  • Moura, Rubens, 2022. "MultiATSM: An R Package for Arbitrage-free Multicountry Affine Term Structure of Interest Rates Models with Unspanned Macroeconomic Risk," LIDAM Discussion Papers LFIN 2022001, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlf:2022001
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    References listed on IDEAS

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    1. Michael D. Bauer & Glenn D. Rudebusch, 2017. "Resolving the Spanning Puzzle in Macro-Finance Term Structure Models," Review of Finance, European Finance Association, vol. 21(2), pages 511-553.
    2. Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 745-787, May.
    3. Jotikasthira, Chotibhak & Le, Anh & Lundblad, Christian, 2015. "Why do term structures in different currencies co-move?," Journal of Financial Economics, Elsevier, vol. 115(1), pages 58-83.
    4. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    5. Scott Joslin & Kenneth J. Singleton & Haoxiang Zhu, 2011. "A New Perspective on Gaussian Dynamic Term Structure Models," The Review of Financial Studies, Society for Financial Studies, vol. 24(3), pages 926-970.
    6. Candelon, Bertrand & Moura, Rubens, 2021. "A Multicountry Model of the Term Structures of Interest Rates with a GVAR," LIDAM Discussion Papers LFIN 2021007, Université catholique de Louvain, Louvain Finance (LFIN).
    7. Scott Joslin & Marcel Priebsch & Kenneth J. Singleton, 2014. "Risk Premiums in Dynamic Term Structure Models with Unspanned Macro Risks," Journal of Finance, American Finance Association, vol. 69(3), pages 1197-1233, June.
    8. Dai, Qiang & Singleton, Kenneth J., 2002. "Expectation puzzles, time-varying risk premia, and affine models of the term structure," Journal of Financial Economics, Elsevier, vol. 63(3), pages 415-441, March.
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    Cited by:

    1. Candelon, Bertrand & Moura, Rubens, 2023. "Sovereign yield curves and the COVID-19 in emerging markets," Economic Modelling, Elsevier, vol. 127(C).

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    Keywords

    Term structure of interest rates models ; macrofinance ; international finance ; financialeconomic connectedness ; R ; MultiATSM;
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