A Segmented and Observable Yield Curve

C Castro (), J. F. Peña and C Rodríguez ()

No 17582, Documentos de Trabajo from Universidad del Rosario

Abstract: Following Almeida et al. (2018) we implement a segmented three factor Nelson-Siegel model for the yield curve using daily observable bond prices and short term inter-bank rates for Colombia. The flexible estimation for each segment (short, medium, and long) provides an improvement over the classical Nelson-Siegel approach in particular in terms of in-sample and out- of-sample forecasting performance. A segmented term structure model based on observable bond prices, provides a tool closer to the needs of practitioners in terms of reproducing the market quotes and allowing for independent local shocks in the different segments of the curve.

Keywords: Term structure; Nelson-Siegel; Preferred habitat theory (search for similar items in EconPapers)
Pages: 17
Date: 2019-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:017582

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