Term Structure Analysis with Big Data
Jens Christensen () and
Glenn Rudebusch ()
No 2017-21, Working Paper Series from Federal Reserve Bank of San Francisco
Analysis of the term structure of interest rates almost always takes a two-step approach. First, actual bond prices are summarized by interpolated synthetic zero-coupon yields, and second, a small set of these yields are used as the source data for further empirical examination. In contrast, we consider the advantages of a one-step approach that directly analyzes the universe of bond prices. To illustrate the feasibility and desirability of the onestep approach, we compare arbitrage-free dynamic term structure models estimated using both approaches. We also provide a simulation study showing that a one-step approach can extract the information in large panels of bond prices and avoid any arbitrary noise introduced from a first-stage interpolation of yields.
JEL-codes: C55 C58 G17 G12 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-09-15, Revised 2017-09-15
New Economics Papers: this item is included in nep-big, nep-ecm and nep-fmk
Note: This version: September 15, 2017.
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Working Paper: Term Structure Analysis with Big Data (2017)
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