IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

On the Choice of Optimization Routine in Estimation of Parsimonious Term Structure Models: Results from the Svensson Model

  • Virmani, Vineet
Registered author(s):

    Objective function in term structure estimation with price errors is not only non-linear but also non-convex in parameters. This makes the final results sensitive to both the choice of the optimization routine as well as to the starting guess. This study looks at the impact of the choice of the optimization routine to final parameter estimates for the Svensson model. While results are expected to differ numerically across routines, what is of interest is the economic impact. Using eleven different routines over a range of starting parameter values, it is found while there is significant variation in the final objective function value across routines, for the most part, implied short-rates and long-rates have low standard deviation. Also, while grid-search seems unavoidable, popular quasi-Newton methods allowing for linear constraints seem quite adequate for the task at hand.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.iimahd.ernet.in/assets/snippets/workingpaperpdf/15603166612013-01-02.pdf
    File Function: English Version
    Download Restriction: no

    Paper provided by Indian Institute of Management Ahmedabad, Research and Publication Department in its series IIMA Working Papers with number WP2013-01-02.

    as
    in new window

    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:iim:iimawp:11470
    Contact details of provider: Phone: 91 79 2630 7241
    Fax: 91 79 2630 6896
    Web page: http://www.iimahd.ernet.in/publications

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Svensson, Lars E O, 1994. "Estimating and Interpreting Forward Interest Rates: Sweden 1992-4," CEPR Discussion Papers 1051, C.E.P.R. Discussion Papers.
    2. Manfred Gilli & Stefan Große & Enrico Schumann, 2010. "Calibrating the Nelson–Siegel–Svensson model," Working Papers 031, COMISEF.
    3. Svensson, L.E.O., 1994. "Estimating and Interpreting Foreward Interest Rates: Sweden 1992-1994," Papers 579, Stockholm - International Economic Studies.
    4. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:iim:iimawp:11470. 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: ()

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.