Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5096671 | Journal of Econometrics | 2011 | 17 Pages |
Abstract
We derive the class of affine arbitrage-free dynamic term structure models that approximate the widely used Nelson-Siegel yield curve specification. These arbitrage-free Nelson-Siegel (AFNS) models can be expressed as slightly restricted versions of the canonical representation of the three-factor affine arbitrage-free model. Imposing the Nelson-Siegel structure on the canonical model greatly facilitates estimation and can improve predictive performance. In the future, AFNS models appear likely to be a useful workhorse representation for term structure research.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Jens H.E. Christensen, Francis X. Diebold, Glenn D. Rudebusch,