Dynamics of Interest Rate Curve by Functional Auto-Regression

Vladislav Kargin () and Alexei Onatski ()

Macroeconomics from University Library of Munich, Germany

Abstract: The paper uses functional auto-regression to predict the dynamics of interest rate curve. It estimates the auto-regressive operator by extending methods of the reduced-rank auto-regression to the functional data. Such an estimation technique is better suited for prediction purposes as opposed to the methods based either on principal components or canonical correlations. The consistency of the estimator is proved using methods of operator theory. The estimation method is used to analyze dynamics of Eurodollar futures rates. The results suggest that future movements of interest rates are predictable at 1-year horizons.

Keywords: functional data analysis; term structure; principal components; canonical correlations; singular value decomposition (search for similar items in EconPapers)
JEL-codes: C14 E43 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2004-04-07, Revised 2004-10-28
New Economics Papers: this item is included in nep-ecm
Note: Type of Document - pdf; pages: 22
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0404/0404008.pdf (application/pdf)

Related works:
Working Paper: Dynamics of Interest Rate Curve by Functional Auto-regression (2004)
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:wpa:wuwpma:0404008

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).