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Zero-Coupon Yield Curve Estimation with the Package termstrc

  • Robert Ferstl
  • Josef Hayden

Since zero-coupon rates are rarely directly observable, they have to be estimated from market data. In this paper we review several widely-used parametric term structure estimation methods. We propose a weighted constrained optimization procedure with analytical gradients and a globally optimal start parameter search algorithm. Moreover, we introduce the R package termstrc, which offers a wide range of functions for term structure estimation based on static and dynamic coupon bond and yield data sets. It provides extensive summary statistics and plots to compare the results of the different estimation methods. We illustrate the application of the package through practical examples using market data from European government bonds and yields.

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Article provided by American Statistical Association in its journal Journal of Statistical Software.

Volume (Year): 36 ()
Issue (Month): i01 ()
Pages:

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Handle: RePEc:jss:jstsof:36:i01
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  1. Hull, John & White, Alan, 1990. "Pricing Interest-Rate-Derivative Securities," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 573-92.
  2. Diebold, Francis X. & Li, Canlin, 2003. "Forecasting the term structure of government bond yields," CFS Working Paper Series 2004/09, Center for Financial Studies (CFS).
  3. Björk, Tomas & Christensen, Bent Jesper, 1997. "Interest Rate Dynamics and Consistent Forward Rate Curves," SSE/EFI Working Paper Series in Economics and Finance 209, Stockholm School of Economics.
  4. repec:dgr:uvatin:20070043 is not listed on IDEAS
  5. Achim Zeileis & Gabor Grothendieck, . "zoo: S3 Infrastructure for Regular and Irregular Time Series," Journal of Statistical Software, American Statistical Association, vol. 14(i06).
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