Consistent Yield Curve Prediction
نویسندگان
چکیده
We present an arbitrage-free, non-parametric yield curve prediction model which takes the full discretized yield curve data as input state variable. The absence of arbitrage is a particular important model feature for prediction models in case of highly correlated data as, e.g., for interest rates. Furthermore, the model structure allows to separate constructing the daily yield curve from estimating the volatility structure and from calibrating the market prices of risk. The empirical part includes tests on modeling assumptions, out-of-sample back-testing and a comparison with the Vasiček short rate model. 2010 Mathematics Subject Classification (MSC2010): 91G30, 91G70
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