Zero Coupon Yield Curve Estimation with the Package Termstrc

Journal of Statistical Software, Forthcoming

Posted: 26 Nov 2008 Last revised: 8 Aug 2010

See all articles by Robert Ferstl

Robert Ferstl

Oesterreichische Nationalbank (OeNB)

Josef Hayden

affiliation not provided to SSRN

Date Written: August 2010

Abstract

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

Suggested Citation

Ferstl, Robert and Hayden, Josef, Zero Coupon Yield Curve Estimation with the Package Termstrc (August 2010). Journal of Statistical Software, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1307149

Robert Ferstl (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Josef Hayden

affiliation not provided to SSRN ( email )

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