CÍMLAP
Reppa Zoltán
Estimating yield curves from swap, BUBOR and FRA data
CONTENTS, ABSTRACT
Contents
Abstract
1 Introduction
2 Theoretical background
Basic definitions
Estimation of the yield curve
3 The data
Swap yields
BUBOR yields
FRA yields
Consistency of BUBOR and FRA data
Forecasting properties of FRA data
4 Estimation results
Residuals
Out-of-sample errors
Forecasting properties
Short rates
Stability
Summary of model properties
5 Summary
Appendices
A Technical details of estimation
Objective function
Initial values
Choice of knot points
B Figures and tables
Estimated forward curves
Residuals
Out-of-sample errors
Forecast errors
Abstract
In this paper we estimate yield curves from Hungarian interest rate swap and money market data. Following general practice, we experiment with several models - differing in the functional form and objective function - and chose the model which performs best according to standard evaluation criteria. We find that the methods perform equally well in terms of residuals and out-of-sample fit; however, the smoothing spline method stands out when we consider the ability to fit the short end of the maturity spectrum, stability of estimation and plausibility of the estimated curves.