Nelson.Siegel {YieldCurve}R Documentation

Estimation of the Nelson-Siegel parameters

Description

Returns the estimated coefficients of the Nelson-Siegel's model.

Usage

Nelson.Siegel(rate, maturity, MidTau)

Arguments

rate vector or matrix which contains the interest rates.
maturity vector wich contains the maturity ( in months) of the rate. The vector's length must be the same of the number of columns of the rate.
MidTau vector which indicates medium term maturity to maximize the beta_2 factor.

Details

The Nelson-Siegel's model to describe the yield curve is:

y_t(tau) = β_{0t} + β_{1t} frac{1-exp(-λ tau)}{λ tau} + β_{2t} (frac{1-exp(-λ tau)}{λ tau} - exp(-λ tau) )

Value

Returns a data frame with the estimated coefficients: β_{0t}, β_{1t}, β_{2t}, and λ.

Author(s)

Sergio Salvino Guirreri

References

Diebold, F.X. and Li, C. (2006), Forecasting the Term Structure of Government Bond Yields, Journal of Econometrics, 130, 337-364.

Diebold, F.X., Ji, L. and Li, C. (2006), A Three-Factor Yield Curve Model: Non-Affine Structure, Systematic Risk Sources, and Generalized Duration, in L.R. Klein (ed.), Long-Run Growth and Short-Run Stabilization: Essays in Memory of Albert Ando. Cheltenham, U.K.: Edward Elgar, 240-274.

Nelson, C.R., and A.F. Siegel (1987), Parsimonious Modeling of Yield Curve, The Journal of Business, 60, 473-489.

See Also

NelsonSiegel, Svensson

Examples

data(FedYieldCurve)
tau <- c(3, 6, 12, 60, 84, 120)
mediumTerm <- c(12,60,84)
NSParameters <- Nelson.Siegel( rate=FedYieldCurve[1:10,], 
                        maturity=tau, MidTau=mediumTerm )
y <- NSrates(NSParameters[5,1:3],
        NSParameters$lambda[5],tau)
plot(tau,FedYieldCurve[5,],main="Fitting Nelson-Siegel yield curve", type="o")
lines(tau,y, col=2)
legend("topleft",legend=c("observed yield curve","fitted yield curve"),
col=c(1,2),lty=1)
grid()

[Package YieldCurve version 2.0 Index]