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Comparison of non-linear optimization algorithms for yield curve estimation

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  • Manousopoulos, Polychronis
  • Michalopoulos, Michalis

Abstract

The yield curve is a very important financial tool used in investment and policy decisions. Its estimation from market data is essentially a non-linear optimization problem. In this paper, we compare a diversity of non-linear optimization algorithms for estimating yield curves based on actual bond market data and conclude that certain classes of algorithms are more effective due to the nature of the problem.

Suggested Citation

  • Manousopoulos, Polychronis & Michalopoulos, Michalis, 2009. "Comparison of non-linear optimization algorithms for yield curve estimation," European Journal of Operational Research, Elsevier, vol. 192(2), pages 594-602, January.
    • Handle: RePEc:eee:ejores:v:192:y:2009:i:2:p:594-602
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    References listed on IDEAS

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    Cited by:

    1. Lorenčič Eva, 2016. "Testing the Performance of Cubic Splines and Nelson-Siegel Model for Estimating the Zero-coupon Yield Curve," Naše gospodarstvo/Our economy, Sciendo, vol. 62(2), pages 42-50, June.
    2. Blomvall, Jörgen, 2017. "Measurement of interest rates using a convex optimization model," European Journal of Operational Research, Elsevier, vol. 256(1), pages 308-316.
    3. Flávio de Freitas Val & Gustavo Silva Araujo, 2022. "Breakeven Inflation Rate Estimation: an alternative approach considering indexation lag and seasonality," Working Papers Series 493, Central Bank of Brazil, Research Department.
    4. Ranik Raaen Wahlstrøm & Florentina Paraschiv & Michael Schürle, 2022. "A Comparative Analysis of Parsimonious Yield Curve Models with Focus on the Nelson-Siegel, Svensson and Bliss Versions," Computational Economics, Springer;Society for Computational Economics, vol. 59(3), pages 967-1004, March.
    5. Aryo Sasongko & Cynthia Afriani Utama & Buddi Wibowo & Zaäfri Ananto Husodo, 2019. "Modifying Hybrid Optimisation Algorithms to Construct Spot Term Structure of Interest Rates and Proposing a Standardised Assessment," Computational Economics, Springer;Society for Computational Economics, vol. 54(3), pages 957-1003, October.
    6. Maciel, Leandro & Gomide, Fernando & Ballini, Rosangela, 2016. "A differential evolution algorithm for yield curve estimation," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 129(C), pages 10-30.
    7. Polychronis Manousopoulos & Michalis Michalopoulos, 2015. "Term structure of interest rates estimation using rational Chebyshev functions," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 38(2), pages 119-146, October.

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