EconPapers    
Economics at your fingertips  
 

Level-Slope-Curvature - Fact or Artefact?

Roger Lord and Antoon Pelsser ()

Applied Mathematical Finance, 2007, vol. 14, issue 2, 105-130

Abstract: The first three factors resulting from a principal components analysis of term structure data are, in the literature, typically interpreted as driving the level, slope and curvature of the term structure. Using slight generalizations of theorems from total positivity, we present sufficient conditions under which level, slope and curvature are present. These conditions have the nice interpretation of restricting the level, slope and curvature of the correlation surface. It is proven that the Schoenmakers-Coffey correlation matrix also brings along such factors. Finally, we formulate and corroborate a conjecture that the order present in correlation matrices cause slope.

Keywords: Principal components analysis; correlation matrix; term structure; total positivity; oscillation matrix; Schoenmakers-Coffey matrix (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/13504860600661111 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Level-Slope-Curvature - Fact or Artefact? (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apmtfi:v:14:y:2007:i:2:p:105-130

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAMF20

DOI: 10.1080/13504860600661111

Access Statistics for this article

Applied Mathematical Finance is currently edited by Professor Ben Hambly and Christoph Reisinger

More articles in Applied Mathematical Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2020-11-13
Handle: RePEc:taf:apmtfi:v:14:y:2007:i:2:p:105-130