A Generalised Arbitrage-free Nelson-siegel Model: The Impact Of Unspanned Stochastic Volatility

Chen, R; Du, K

A Generalised Arbitrage-free Nelson-siegel Model: The Impact Of Unspanned Stochastic Volatility

Chen, R Du, K

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Publisher:: Academic Press Inc Elsevier Science
Publication Type:: Journal Article
Citation:: Finance Research Letters, 2013, 10 (1), pp. 41 - 48
Issue Date:: 2013-01

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Field	Value	Language
dc.contributor.author	Chen, R	en_US
dc.contributor.author	Du, K	en_US
dc.date.issued	2013-01	en_US
dc.identifier.citation	Finance Research Letters, 2013, 10 (1), pp. 41 - 48	en_US
dc.identifier.issn	1544-6123	en_US
dc.identifier.uri	http://hdl.handle.net/10453/27743
dc.description.abstract	Although statistical term structure models provide exceptional in-sample fitting and out-of-sample forecasting of interest rates, the lack of theoretical background is criticized by academics and practitioners, such as the absent of arbitrage free. In this paper we develop a general Arbitrage-Free NelsonSiegel model under the HJM framework. It features unspanned stochastic volatility factors while maintaining a NelsonSiegel factor loading structure. This paper also exploits the potential to jointly model the interest rates and their derivatives.	en_US
dc.publisher	Academic Press Inc Elsevier Science	en_US
dc.relation.ispartof	Finance Research Letters	en_US
dc.relation.isbasedon	10.1016/j.frl.2012.07.001	en_US
dc.subject.classification	Finance	en_US
dc.title	A Generalised Arbitrage-free Nelson-siegel Model: The Impact Of Unspanned Stochastic Volatility	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	10	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	true	en_US
pubs.issue	1	en_US
pubs.volume	10	en_US

Abstract:

Although statistical term structure models provide exceptional in-sample fitting and out-of-sample forecasting of interest rates, the lack of theoretical background is criticized by academics and practitioners, such as the absent of arbitrage free. In this paper we develop a general Arbitrage-Free NelsonSiegel model under the HJM framework. It features unspanned stochastic volatility factors while maintaining a NelsonSiegel factor loading structure. This paper also exploits the potential to jointly model the interest rates and their derivatives.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/27743