Term Structure of Interest Rates in Costa Rican Colones (Zero-Coupon Curve): Methodology and Derivation of Forward Rates and the Exchange Risk Premium

Juan José Víquez-Rodríguez (), Laura Campos-Quesada () and Isaac Zúñiga-Arias ()
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Juan José Víquez-Rodríguez: Department of Economic Research, Central Bank of Costa Rica
Laura Campos-Quesada: University of Costa Rica
Isaac Zúñiga-Arias: University of Costa Rica

No 2508, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: The current document consolidates the fundamental theoretical definitions for constructing the Zero-Coupon Curve in colones for the Costa Rican economy. Initially, the theoretical foundations supporting the employed methodology are presented, and the modeling of the zero-coupon curve is established, specifically adjusted for Costa Rican secondary market transactions. This includes specifying the no-arbitrage conditions that must be followed during optimization to ensure that the resulting curve aligns coherently with the theory. Subsequently, the heuristic methods used in optimizing the parameters of Svensson and Nelson-Siegel curves with constraints are explained. Finally, indicators and associated curves are developed, such as Par Yield Curve, forward rates and exchange risk premium. ***Resumen: El presente documento consolida las definiciones teóricas fundamentales para la construcción de la Curva Cero Cupón en colones para la economía costarricense. Inicialmente se presentan los fundamentos teóricos que respaldan la metodología empleada y se establece la modelación de la curva cero cupón ajustada para las transacciones de mercado secundario costarricense, especificando las condiciones de no arbitraje que deben ser seguidas por la optimización para asegurar que la curva obtenida al final sea coherente con la teoría. Posteriormente, se explican los métodos heurísticos utilizados en la optimización de los parámetros de las curvas Svensson y Nelson-Siegel con restricciones. Finalmente, se desarrollan indicadores y curvas asociadas, tales como la Curva Par, las tasas forward y la prima por riesgo cambiario.

Keywords: Nelson-Siegel; Svensson; Zero-Coupon Curve; Heuristic Optimization; Par Yield Curve; Forward Rates; Exchange Risk Premium; Curva Cero Cupón; Optimización Heurística; Curva Par; Tasas Plazo; Riesgo Cambiario (search for similar items in EconPapers)
JEL-codes: C58 C61 E43 G12 H63 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2025-11
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:2508

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