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Affine Term Structure Models: Forecasting the Yield Curve for Colombia


  • Mateo Velásquez Giraldo

    () (Universidad EAFIT)

  • Diego Restrepo Tobón

    () (Universidad EAFIT)


Superior modeling of the yield curve is useful for asset pricing, financial planning, and risk management. In this article, we estimate five affine term structure models using daily data for Colombia. We find that a three-factor model outperforms the other models in one and five day ahead forecasts. The model factors closely mimic empirical proxies for the level, the slope, and the curvature of the yield curve in Colombia.

Suggested Citation

  • Mateo Velásquez Giraldo & Diego Restrepo Tobón, 2016. "Affine Term Structure Models: Forecasting the Yield Curve for Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 85, pages 53-90, Julio - D.
  • Handle: RePEc:lde:journl:y:2016:i:85:p:53-90
    DOI: 10.17533/udea.le.n85a02

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    More about this item


    term structure; forecasting; interest rates; multifactor models;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation


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