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Consistency of extended Nelson-Siegel curve families with the Ho-Lee and Hull and White short rate models

Patricia Kisbye and Karem Meier

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Abstract: Nelson and Siegel curves are widely used to fit the observed term structure of interest rates in a particular date. By the other hand, several interest rate models have been developed such their initial forward rate curve can be adjusted to any observed data, as the Ho-Lee and the Hull and White one factor models. In this work we study the evolution of the forward curve process for each of this models assuming that the initial curve is of Nelson-Siegel type. We conclude that the forward curve process produces curves belonging to a parametric family of curves that can be seen as extended Nelson and Siegel curves.

Date: 2017-07
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Handle: RePEc:arx:papers:1707.02496