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Title: | A shape-based decomposition of the yield adjustment term in the arbitrage-free Nelson and Siegel (AFNS) model of the yield curve |
Authors: | Steeley, JM |
Keywords: | arbitrage-free;Nelson–Siegel model;yield curve |
Issue Date: | 19-Mar-2014 |
Publisher: | Taylor & Francis |
Citation: | Applied Financial Economics, 2014, 24 (10), pp. 661 - 669 |
Abstract: | The appealing feature of the arbitrage-free Nelson-Siegel model of the yield curve is the ability to capture movements in the yield curve through readily interpretable shifts in its level, slope or curvature, all within a dynamic arbitrage-free framework. To ensure that the level, slope and curvature factors evolve so as not to admit arbitrage, the model introduces a yield-adjustment term. This paper shows how the yield-adjustment term can also be decomposed into the familiar level, slope and curvature elements plus some additional readily interpretable shape adjustments. This means that, even in an arbitrage-free setting, it continues to be possible to interpret movements in the yield curve in terms of level, slope and curvature influences. © 2014 © 2014 Taylor & Francis. |
URI: | http://bura.brunel.ac.uk/handle/2438/20531 |
DOI: | http://dx.doi.org/10.1080/09603107.2014.896980 |
ISSN: | 0960-3107 http://dx.doi.org/10.1080/09603107.2014.896980 1466-4305 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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