Optimal Mix of the Extended Nelson Siegel Model for Turkish Sovereign Yield Curve

Oguzhan Cepni and Doruk Küçüksaraç

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] Yield curve is one of the most fundamental tools used by central banks. The most popular method to estimate yield curve by the central banks is Extended Nelson Siegelmodel. However, there are some technical differences in yield curve estimation. These differences are mainly related to the choice of objective function and the maturity spectrum of bonds in the data set. In this respect, this note aims to find out the optimal combination of the Turkish Treasury bond market yield curve based on the Extended Nelson Siegel model. Main findings indicate that the exclusion of long-term bonds results in a better in-sample fit for the short-term bonds.On the other hand, the inclusion of repo transactions leads to a worsening in in-sample fit across all maturity segments regardless of the choice of the objective function. Regarding the choice of objective function, weighted price minimization provides better in sample-fit of the yield curve for all different maturity segments when the repo transactions are excluded. [TR] Getiri egrisi, merkez bankalari tarafindan kullanilan en temel araclardan birisidir. Merkez bankalarinca getiri egrisi tahmin etmek icin en yaygin kullanilan yontem Genisletilmis Nelson Siegel modelidir. Getiri egrisinin tahmininde bazi teknik unsurlar onem arz etmektedir. Soz konusu unsurlar, amac fonksiyonunun secimi ve tahminde kullanilacak tahvil ve bonolarin vade dagilimi olarak iki ana baslik altinda incelenebilir. Bu baglamda, bu notta Genisletilmis Nelson Siegel modeli kullanilarak, Turkiye Hazine tahvil piyasa getiri egrisi icin en uygun amac fonksiyonu ve vade dagilimi bilesimi incelenmektedir. Temel bulgular, uzun vadeli tahvillerin veri setinden cikarilmasinin kisa vadeli tahvil getirilerinin tahminine olumlu yonde katki sagladigina isaret etmektedir. Bununla beraber repo islemlerinin veri setine dahil edilmesi amac fonksiyonuna bagli olmaksizin tum vadelerde getiri egrisi tahminini kotulestirmektedir. Amac fonksiyonu secimi olarak ise, agirliklandirilmis fiyat farklarinin minimize edilmesi repo islemlerinin eklenmedigi durumda daha iyi sonuc vermektedir.

Date: 2017
New Economics Papers: this item is included in nep-ara
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.tcmb.gov.tr/wps/wcm/connect/97077fc2-9 ... 834e27d8df25-m3fw5t2 (application/pdf)

Related works:
Journal Article: Optimal Mix of the Extended Nelson Siegel Model for Turkish Sovereign Yield Curve (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcb:econot:1702

Access Statistics for this paper

More papers in CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by () and ().