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Forecasting Interest Rates Using Geostatistical Techniques

Giuseppe Arbia () and Michele Di Marcantonio ()
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Michele Di Marcantonio: Department of Statistical Sciences, University of Rome “La Sapienza”, Viale Regina Elena, 295-00161 Rome, Italy

Econometrics, 2015, vol. 3, issue 4, 1-28

Abstract: Geostatistical spatial models are widely used in many applied fields to forecast data observed on continuous three-dimensional surfaces. We propose to extend their use to finance and, in particular, to forecasting yield curves. We present the results of an empirical application where we apply the proposed method to forecast Euro Zero Rates (2003–2014) using the Ordinary Kriging method based on the anisotropic variogram. Furthermore, a comparison with other recent methods for forecasting yield curves is proposed. The results show that the model is characterized by good levels of predictions’ accuracy and it is competitive with the other forecasting models considered.

Keywords: term structure; yield curve; forecasting; geostatistics; variogram; Ordinary Kriging (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2015
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