The deterministic shift extension and the affine dynamic Nelson–Siegel model
Jean-Marc Le Caillec and
The North American Journal of Economics and Finance, 2014, vol. 29, issue C, 402-417
The affine dynamic Nelson–Siegel model links the affine class of models with the Nelson–Siegel interpolation scheme of the yield curve. Its parameters are interpreted as the latent factors of the spot rate process driven by an affine diffusion. Using an appropriate specification of this diffusion, the yields become in form of the Nelson–Siegel model but an adjustment term is introduced. In this paper, the model is extended using a deterministic shift extension so as to perfectly fit the term structure and reduce the correction term. This enhancement allows to simulate the yield curve and the spot rate process consistently with the market data used for the calibration of the model. A numerical example discusses the calibration results of the original model and the proposed extension.
Keywords: Affine; Calibration; Interest rates; Multi-factor; Term structure (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:29:y:2014:i:c:p:402-417
Access Statistics for this article
The North American Journal of Economics and Finance is currently edited by Hamid Beladi
More articles in The North American Journal of Economics and Finance from Elsevier
Series data maintained by Dana Niculescu ().