Andraž, Grum (2006): Razvitost slovenskega trga dolžniškega kapitala in ocenitev krivulje donosnosti. Published in: Financial stability report: Expert papers on financial stability No. Bank of Slovenia (May 2006): pp. 1-86.
Download (1284Kb) | Preview
Despite of the importance of term structure estimation for business and monetary purposes, Slovenian term structure has not yet been estimated. Partly the blame goes to underdeveloped bond market, characterized by high portion of foreign currency issues in Slovenian government bond outstanding, the lack of long term instruments and low liquidity on the secondary market. The liquidity improved with parallel OTC-DVP market introduction in September 2005 and consequently the information value of fixed income asset prices for term structure estimation purposes has improved significantly. In this paper we will present theoretical methods of static term structure estimation. The goals are to obtain initial estimates of Slovenian term structure, to identify the most suitable estimation method and to analyze the volatility movements of zero coupon yields and forward interest rates for different maturities in analyzed time period. Among applied models of term structure estimation, namely Nelson-Siegel model, Svensson model, Bsplines model, smoothing B-splines model and Merrill Lynch exponential splines model, Nelson-Siegel model proved to be superior in terms of goodness of fit measured as root mean square error (RMSE), mean absolute error (MAE), mean percentage error (MPE) and hit ratio. The resulted estimates are to the knowledge of the author initial estimates of Slovenian term structure. With OTC-DVP bond market introduction (as parallel bond market) the volatility of spot and forward rates for mid and long remind maturities has fallen. Volatility reduction is important, as 10 year benchmark bond yield is closely observed as one of Maastricht’s criteria which have to be fullfield before joining the EMU.
|Item Type:||MPRA Paper|
|Institution:||Bank of Slovenia|
|Original Title:||Razvitost slovenskega trga dolžniškega kapitala in ocenitev krivulje donosnosti|
|English Title:||The development of the Slovenian government debt market and estimation of the yiled curve|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
|Depositing User:||Andraz Grum|
|Date Deposited:||12. Sep 2007|
|Last Modified:||13. Feb 2013 18:03|
1. Anderson, Nicola, Sleath, John: New estimates of the UK real and nominal yield curves. Bank of England, Working Paper No. 126, 2001. 2. Bank for International Settlements: Zero-coupon yield curves: Technical documentation. Basel: BIS, March 1999. 3. Bank of Japan: A technical note on the estimation of the zero-coupon yield and forward rate curves of Japanese government securities, Bank for International Settlements: Zero-coupon yield curves: Technical documentation. Basel: BIS, March 1999, pp 17–22. 4. Bekdache, Basma, Baum, Christopher F.: The ex ante predictive accuracy of alternative models of the term structure of interest rates. Boston College Working Paper 372, 1997. 5. Bolder, David J., Johnson, Grahame, Metzler, Adam: An empirical analysis of the Canadian term structure of zero-coupon interest rates. Bank of Canada, Working Paper 2004–48, 2004. 6. Bolder, David J., Gusba, Scott: Exponentials, polynomials, and Fourier series: More yield curve modelling at the Bank of Canada. Bank of Canada, Working Paper 2002–29, 2002. 7. Brandner, Peter, Jaeger, Alfred: Zinsniveau und Zinsstruktur in Österreich. Wien: WIFO, mimeo, September 1992. 8. Campbell, John Y., Lo, Andrew W., MacKinlay, Craig A.: The Econometrics of Financial Markets. Princeton: Princeton University Press, 1997. 9. Chow, Gregory C.: Econometrics. New York: McGraw-Hill, 1983. 10. Dahlquist, Magnus, Svensson, Lars E.O.: Estimation of the term structure of interest rates for monetary policy analysis. Scandinavian Journal of Economics, Vol. 98, 2 (1996), pp 163–183. 11. DeBoor, Carl: User’s guide: Spline toolbox for use with MATLAB. Natick: The MathWorks Inc., 2003. 12. Dillen, Hans: The estimation of forward interest rates at the Riksbank, Bank for International Settlements: Zero-coupon yield curves: Technical documentation. Basel: BIS, March 1999, pp 30–31. 13. Dombrecht, Michel, Wouters, Raf: Technical note on the estimation procedure for the Belgian yield curve, Bank for International Settlements: Zero-coupon yield curves: Technical documentation. Basel: BIS, March 1999, pp 1–2. 14. Fisher, Mark, Nychka, Douglas, Zervos, David: Fitting the term structure of interest rates with smoothing splines. U.S. Federal reserve board working paper, September 1994. 15. Fisher, Mark, Zervos, David: Yield curve, ed. Varian Hal: Computational Economics and Finance: Modelling and analysis with MATHEMATICA. New York: Springer-Verlag, 1996. 16. Grum, Andraž: Dolžniški trg in regulativa do upravljavcev pokojninskih skladov (Debt market and regulation for pension fund managers), Bančni vestnik, Vol. 54, 10 (2005), pp 28–31. 17. Hamilton, James Douglas: Time Series Analysis. Princeton: Princeton University Press, 1992. 18. Ioannides, Michalis: A comparison of yield curve estimation techniques using UK data. Journal of Banking & Finance, Vol. 27, 1 (2003), pp 1–26. 19. Jordan, James V.: Tax effects in term structure estimation. The Journal of Finance, Vol. 39, 2 (1984), pp 393–406. 20. Li, B.E., DeWetering, E., Lucas, G., Brenner, R., Shapiro, A.: Merrill Lynch exponential spline model. Merrill Lynch Working paper, 2001. 21. Litzenberger, Robert H., Rolfo, Jacques: An international study of tax effects on government bonds. The Journal of Finance, Vol. 39, 1 (1984), pp 1–22. 22. Longstaff, Francis A., Schwartz, Eduardo S.: Interest rate volatility and term structure: A two factor model. Journal of Finance, Vol. 47, 4 (1992), pp 1259–1282. 23. McCulloch, Huston J.: Measuring the term structure of interest rates. Journal of Business, Vol. 44, 1 (1971), pp 19–31. 24. McCulloch, Huston J.: The tax-adjusted yield curve. Journal of Finance, Vol. 30, 3 (1975), pp 811–830. 25. Meier, Iwan: Estimating the term structure of interest rates: The Swiss case. Swiss Institute of Banking and Finance, Working Paper No. 9906, 1999, page 28. 26. Modigliani, Franco, Fabozzi, Frank J.: Capital Markets, Institutions and Instruments. London: Prentice Hall, 1996, pp 768. 27. Mohanty, M. S.: Improving liquidity in government bond markets: What can be done? BIS Papers No. 11. Basel: Bank for International Settlements, 2001. 28. Nelson, Charles R., Siegel, Andrew F.: Parsimonious modeling of yield curves for U.S. treasury bills. Cambridge: National Bureau of Economic Research, Working paper No. 1594, 1985. 29. Nelson, Charles R., Siegel, Andrew F.: Parsimonious modeling of yield curves. Journal of business, Vol. 60, 3 (1987), pp 473–489. 30. Ricart, Roland, Sicsic, Pierre: Estimating the term structure of interest rates from French data. Banque de France, Bulletin Digest, No. 22, October 1995, pp 47–58. 31. Schaefer, Stephen M.: On measuring the term structure of interest rates. London Business School Institute of Finance and Accounting, Discussion Paper No. IFA-2–74, 1973. 32. Schaefer, Stephen M.: Measuring a tax-specific term structure of interest rates in the market for British government securities. Economic Journal, Vol. 91, June 1981, pp 415–438. 33. Schich, Sebastian T.: Estimating German term structure. Frankfurt am Main: Deutsche Bundesbank, Economic research group of the Deutsche Bundesbank, Discussion paper 4/97, October 1997. 34. Seppälä, Juha, Viertiö, Petri: The term structure of interest rates: Estimation and interpretation. Bank of Finland, Bank of Finland Discussion Papers 19/96, 1996. 35. Shea, Gary S.: Pitfalls in smoothing interest rate term structure data. Journal of Financial and Quantitative Analysis. Vol. 19, 3 (1984), pp 253–269. 36. Steeley, James M.: Estimating the gilt-edged term structure: Basis splines and confidence intervals. Journal of Business Finance & Accounting, Vol. 18, 4 (1991), pp 513–529. 37. Svensson, Lars E. O.: Estimating and interpreting forward interest rates: Sweden 1992–1994. Cambridge: National Bureau of Economic Research, Working paper No. 4871, 1994. 38. Svensson, Lars E. O.: Estimating forward interest rates with the extended Nelson & Siegel method. Stockholm: Sveriges Riksbank, Quarterly Review, 3 (1995), pp 13–26. 39. Tanggaard, Carsten: Nonparametric smoothing of yield curves. Review of Quantitative Finance and Accounting, Vol. 9, 3 (1997), pp 251–267. 40. Vasicek, Oldrich A., Fong, Gifford H.: Term structure modeling using exponential splines. The Journal of Finance, Vol. 37, 2 (1982), pp 339–348. 41. Waggoner, Daniel F.: Spline methods for extracting interest rate curves from coupon bond prices. Federal Reserve Bank of Atlanta, Working paper 97–10.