Forecasting the yield curve: A statistical model with market survey data

André Luís Leite, Romeu Braz Pereira Gomes Filho and José Valentim Machado Vicente

International Review of Financial Analysis, 2010, vol. 19, issue 2, 108-112

Abstract: In this paper we propose a statistical model to forecast the yield curve, using two major sources of information: data from a market survey and the forward rate risk premium. We apply the model to forecast the Brazilian yield curve six months ahead and compare the results with the well-known model of Diebold and Li (2006), a random walk process and the predictions based on the forward rate. The proposed model produces accurate forecasts and outperforms all the competitor models in terms of root mean square error (RMSE).

Keywords: Yield; curve; forecasting; Risk; premium; Market; surveys (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:19:y:2010:i:2:p:108-112

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