Long-horizon yield curve projections: comparison of semi-parametric and parametric approaches

Ken Nyholm and Riccardo Rebonato

Applied Financial Economics, 2008, vol. 18, issue 20, 1597-1611

Abstract: Two methods for evolving forward the yield curve are evaluated and contrasted within a Monte Carlo experiment: one is originally presented by Rebonato et al. (2005) and the other by Bernadell et al. (2005). A detailed account for how to implement the models is also presented. Results suggest that the two techniques are complementary and able to capture important cross-sectional and time-series properties of observed yield curve data. Our results are of interest to practitioners in the financial markets as well as central banks who need accountable and history consistent procedures for generating long-term yield curve forecasts.

Date: 2008
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DOI: 10.1080/09603100701630048

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