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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