spotrates {termstrc}R Documentation

Function for the Calculation of the Spot Rates

Description

The function calculates the spot rates for the chosen approach, a provided maturity vector and parameter set.

Usage

spotrates(method, beta, m)

Arguments

method "Nelson/Siegel" or "Svensson".
beta parameter set bm{β}.
m maturity or a vector of maturities.

Details

The spot rates according to Nelson/Siegel are defined as:

s(m,bm{β}) = β_0 + β_1frac{1-exp(-frac{m}{tau_1})}{frac{m}{tau_1}} + β_2(frac{1-exp(-frac{m}{tau_1})}{frac{m}{tau_1}} - exp(-frac{m}{tau_1})).

Svensson defines the spot rate function as follows:

s(m,bm{β}) = β_0 + β_1frac{1-exp(-frac{m}{tau_1})}{frac{m}{tau_1}} + β_2(frac{1-exp(-frac{m}{tau_1})}{frac{m}{tau_1}} - exp(-frac{m}{tau_1})) + β_3(frac{1-exp(-frac{m}{tau_2})}{frac{m}{tau_2}} - exp(-frac{m}{tau_2}))

Value

Returns a vector with the calculated spot rates.

References

Charles R. Nelson and Andrew F. Siegel (1987): Parsimonious Modeling of Yield Curves. The Journal of Business, 60(4):473–489.

Lars E.O. Svensson (1994): Estimating and Interpreting Forward Interest Rates: Sweden 1992 -1994. Technical Reports 4871, National Bureau of Economic Research.


[Package termstrc version 1.1 Index]