Zero Coupon Yield Curve Estimation with the Package Termstrc
Journal of Statistical Software, Forthcoming
Posted: 26 Nov 2008 Last revised: 8 Aug 2010
Date Written: August 2010
Since zero-coupon rates are rarely directly observable, they have to be estimated from market data. In this paper we review several widely-used parametric term structure estimation methods. We propose a weighted constrained optimization procedure with analytical gradients and a globally optimal start parameter search algorithm. Moreover, we introduce the R package termstrc, which offers a wide range of functions for term structure estimation based on static and dynamic coupon bond and yield data sets. It provides extensive summary statistics and plots to compare the results of the different estimation methods. We illustrate the application of the package through practical examples using market data from European government bonds and yields.
Keywords: fixed income, term structure estimation, global optimization, R
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