The affine arbitrage-free class of Nelson-Siegel term structure models

Jens Christensen, Francis Diebold and Glenn Rudebusch

Journal of Econometrics, 2011, vol. 164, issue 1, 4-20

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: Yield; curve; Interest; rate; Bond; market; Factor; model; Forecasting (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (210)

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Related works:
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)
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:eee:econom:v:164:y:2011:i:1:p:4-20

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