Munich Personal RePEc Archive

Modeling the yield curve of spot interest rates under the conditions in Bulgaria

Ganchev, Alexander (2009): Modeling the yield curve of spot interest rates under the conditions in Bulgaria. Published in: Narodnostopanski Arhiv , Vol. 1, No. International edition (2009): pp. 119-137.

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Abstract

The article investigate the accuracy and stability of quantitative models for modeling of the spot rate curve under the Bulgarian conditions. The empirical analysis does not single out the best model for modeling the spot interest curve although it shows that the model with the worst performance considering all quantitative criteria is the model of Nelson and Siegel.The empirical results show that despite their accuracy the models proposed by Svensson, Vasicek, and El Karoui, Cherif, Dicoum, and Savidan are not stable. On the other hand the model proposed by Martellini and Priaulet stands out with its greater performance stability. The combination of its satisfactory stability and ability to model correctly the bond prices makes this model the most appropriate method for modeling the spot interest rates curve in Bulgaria.

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