The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models

Jens Christensen, Francis Diebold and Glenn Rudebusch

No 2007-20, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We derive the class of affine arbitrage-free dynamic term structure models that approximate the widely-used Nelson-Siegel yield curve specification. These arbitrage-free Nelson-Siegel (AFNS) models can be expressed as slightly restricted versions of the canonical representation of the three-factor affine arbitrage-free model. Imposing the Nelson-Siegel structure on the canonical model greatly facilitates estimation and can improve predictive performance. In the future, AFNS models appear likely to be a useful workhorse representation for term structure research.

Keywords: Interest rates; Econometric models (search for similar items in EconPapers)
Pages: 43
Date: 2010-03-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: The affine arbitrage-free class of Nelson-Siegel term structure models (2011)
Working Paper: The Affine Arbitrage-Free Class of: Nelson-Siegel Term Structure Models (2007)
Working Paper: The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2007-20

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DOI: 10.24148/wp2007-20

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