Forecasting Bond Yields with Segmented Term Structure Models

@inproceedings{Almeida2018ForecastingBY,
  title={Forecasting Bond Yields with Segmented Term Structure Models},
  author={Caio Almeida and Kym Marcel Martins Ardison and Daniela Kubudi and Axel Andre Simonsen and Jos{\'e} V. M. Vicente},
  year={2018}
}
  • Caio Almeida, Kym Marcel Martins Ardison, +2 authors José V. M. Vicente
  • Published 2018
  • Economics
  • Recent empirical analysis of interest rate markets documents that bond demand and supply directly affect yield curve movements and bond risk premium. Motivated by those findings we propose a parametric interest rate model that allows for segmentation and local shocks in the term structure. We split the yield curve in segments presenting their own local movements that are globally interconnected by smoothing conditions. Two classes of segmented exponential models are derived and compared to… CONTINUE READING

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