BEST FIT MODEL FOR YIELD CURVE ESTIMATION

Yield curve represents a relationship between the rate of return and maturity of certain securities. A range of activities on the market is determined by the abovementioned relationship; therefore its significance is unquestionable. Besides that, its shape reflects the shape of the economy, i.e. it...

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Bibliographic Details
Published inCroatian Operational Research Review Vol. 3; no. 1; p. 28
Main Authors Aljinović, Zdravka, Poklepović, Tea, Katalinić, Kristina
Format Paper
LanguageEnglish
Published Hrvatsko društvo za operacijska istraživanja 30.12.2012
Subjects
Croatian financial market
Nelson-Siegel model
Svensson model
yield curve
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Summary:Yield curve represents a relationship between the rate of return and maturity of certain securities. A range of activities on the market is determined by the abovementioned relationship; therefore its significance is unquestionable. Besides that, its shape reflects the shape of the economy, i.e. it can predict recession. These are the reasons why it is very important to properly and accurately estimate the yield curve. There are various models evolved for its estimation; however the most used are parametric models: Nelson-Siegel model and Svensson model. In this paper the yield curves are estimated on Croatian financial market, based on weekly data in years 2011 and 2012 both with Nelson-Siegel and Svensson model, and the obtained results are compared.
Bibliography:96702
ISSN:1848-0225
1848-9931