Biblioteca de la Universidad Complutense de Madrid

The forecasting ability of factor models of the term structure of IRS markets

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Novales Cinca, Alfonso y Abad Romero, Pilar (2002) The forecasting ability of factor models of the term structure of IRS markets. [ Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 0221, 2002, ]

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URL Oficial: http://eprints.ucm.es/7680/




Resumen

Using estimated principal components as factors, three-factors models are shown to produce forecasts comparable to those of autoregressive models for 2 to 10 year zaero coupon interest rates IRS markets both, for short- and medium- term forecasting horizons. Evidence is provided for the Deutsche mark, Spanish peseta, Japanese yen and US Dollar. Forecast from factor models are also shown to preserve the correlation matrix of interest rates across a given term structure, an important proprerty regarding risk management. The result is quite striking, because factor models are purely static, and forecasts for the factors must be obtained in advance of interest rate forecast.factor models


Tipo de documento:Documento de trabajo o Informe técnico
Información Adicional:

JEL Classification: E37, E43

Palabras clave:Factor models, Term structure of interest rates, Principal components, Swap markets, IRS
Materias:Ciencias Sociales > Economía > Estructura económica
Título de serie o colección:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volumen:2002
Número:0221
Código ID:7680
Depositado:04 Mar 2008
Última Modificación:06 Feb 2014 07:55

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