Estimating the Term Structure of Interest Rates
AbstractThis paper examines various techniques used to estimate the term structure of interest rates from the prices of government bonds; in particular comparing the current Bank of England model with two approaches suggested in the academic literature. There are two main aspects of this problem: estimating the relationship between bond yields and maturity, and the relationship between bond yields and coupon. The paper outlines how these problems are approached by the three models, and compares them on both theoretical and practical grounds. It concludes that there is a trade-off between theoretical rigour and practical considerations.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 24.
Date of creation: Jul 1994
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- Martin Evans, 2002.
"Real Risk, Inflation Risk, and the Term Structure,"
gueconwpa~02-02-10, Georgetown University, Department of Economics.
- Lin, Bing-Huei, 1999. "Fitting the term structure of interest rates for Taiwanese government bonds," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 331-352, November.
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- J. Huston McCulloch, 2001. "The Inflation Premium implicit in the US Real and Nominal," Computing in Economics and Finance 2001 210, Society for Computational Economics.
- Lin, Bing-Huei & Yeh, Shih-Kuo, 2001. "Estimation for factor models of term structure of interest rates with jumps: the case of the Taiwanese government bond market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 11(2), pages 167-197, June.
- Steeley, James M., 1997. "Implied volatility from the term structure: a simple analytical approximation," Economics Letters, Elsevier, vol. 57(3), pages 345-352, December.
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