Estimating and Forecasting the Term Structure of Korea Markets Using the Nelson-Siegel Model

Joon Haeng Lee (Seoul Women’s University)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 30 November 2004

Abstract

To see the forecasting ability of our model, we compare the RMSEs (root mean square error) of our model to random walk (RW) model and principal component model for out-of sample period as well as in-sample period. we find that our model has better forecasting performances over principal component model but shows slight edge over RW model especially for long run forecasting period. Considering that it is difficult for any model to show better forecasting ability over the RW model in out-of-sample period, results suggest that our model is useful for practitioners to forecast yields curve dynamics.

Citation

Lee, J.H. (2004), "Estimating and Forecasting the Term Structure of Korea Markets Using the Nelson-Siegel Model", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 12 No. 2, pp. 101-126. https://doi.org/10.1108/JDQS-02-2004-B0005

Publisher

:

Emerald Publishing Limited

Copyright © 2004 Emerald Publishing Limited

License

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