IDEAS home Printed from https://ideas.repec.org/a/ris/joefas/0074.html
   My bibliography  Save this article

Dynamic estimation of an interest rate structure in Colombia. Empirical analysis using the Kalman filter

Author

Listed:
  • Maldonado, Rogelio

    () (Universidad de Medellin)

  • Zapata, Natalia

    () (Universidad EAFIT)

  • Pantoja, Javier

    () (Universidad EAFIT)

Abstract

The official estimation for the term structure model in Colombia is based on the Nelson and Siegel (1987) development which is widely accepted and used. This estimation is based on the curve fitting with available data, only for one day ahead, making difficult to estimate the future zero-coupon yield curve. Taking into account the importance of having an estimation of the term structure for the valuation of financial assets in the Colombian market, this research proposes a methodology to estimate in a dynamic form the parameters of interest rates in the Nelson and Siegel Model. This required the use of the reparameterization proposed by Diebold and Li (2006), which determines the shape of the term structure through latent factors such as level, slope and curvature. This paper aims to show the dynamic estimation of the term structure of interest rate using the Kalman filter methodology framed in State - space. Results show that predictions are successful for more than one period in the future.

Suggested Citation

  • Maldonado, Rogelio & Zapata, Natalia & Pantoja, Javier, 2014. "Dynamic estimation of an interest rate structure in Colombia. Empirical analysis using the Kalman filter," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 19(37), pages 70-77.
  • Handle: RePEc:ris:joefas:0074
    as

    Download full text from publisher

    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2533632
    File Function: Full text
    Download Restriction: no

    More about this item

    Keywords

    Term structure; Kalman filter; Dynamic estimation;

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:joefas:0074. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ESAN Ediciones). General contact details of provider: http://edirc.repec.org/data/esannpe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.