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Conditions For Consistent Exponential-Polynomial Forward Rate Processes With Multiple Nontrivial Factors

Author

Listed:
  • EMMANUEL SHAREF

    (Department of Operations Research and Industrial Engineering, Cornell University, Rhodes Hall, Ithaca, NY 14850, USA)

  • DAMIR FILIPOVIĆ

    (Federal Office of Private Insurance, Friedheimweg 14, 3003 Bern, Switzerland)

Abstract

We present conditions that allow consistent exponential-polynomial forward curve models with two exponential terms to have more than one nontrivial factor. This result leads to seven- and nine-parameter extensions of the Svensson model, for which the consistency conditions allow for two and three stochastic parameters respectively.

Suggested Citation

  • Emmanuel Sharef & Damir Filipović, 2004. "Conditions For Consistent Exponential-Polynomial Forward Rate Processes With Multiple Nontrivial Factors," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 7(06), pages 685-700.
    • Handle: RePEc:wsi:ijtafx:v:07:y:2004:i:06:n:s0219024904002608
    DOI: 10.1142/S0219024904002608
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    References listed on IDEAS

    as
    1. Lars E.O. Svensson, 1994. "Estimating and Interpreting Forward Interest Rates: Sweden 1992 - 1994," NBER Working Papers 4871, National Bureau of Economic Research, Inc.
    2. Svensson, Lars E O, 1994. "Estimating and Interpreting Forward Interest Rates: Sweden 1992-4," CEPR Discussion Papers 1051, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Almeida, Caio & Gomes, Romeu & Leite, André & Vicente, José, 2008. "Movimentos da Estrutura a Termo e Critérios de Minimização do Erro de Previsão em um Modelo Paramétrico Exponencial," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 62(4), December.
    2. Frank J. Fabozzi & Francesco A. Fabozzi & Diana Tunaru, 2023. "A comparison of multi-factor term structure models for interbank rates," Review of Quantitative Finance and Accounting, Springer, vol. 61(1), pages 323-356, July.

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