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Accurately fitting the term structure of interest rates is critical to central banks and other market participants. The Nelson-Siegel and Nelson-Siegel-Svensson models are probably the best-known models for this purpose due to their…
While asset-pricing models increasingly recognize that factor risk premia are subject to structural change, existing literature typically assumes that investors correctly account for such instability. This paper studies how investors…
We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in…
Triangular systems with nonadditively separable unobserved heterogeneity provide a theoretically appealing framework for the modelling of complex structural relationships. However, they are not commonly used in practice due to the need for…
The Nelson-Siegel model is widely used in fixed income markets to produce yield curve dynamics. The multiple time-dependent parameter model conveniently addresses the level, slope, and curvature dynamics of the yield curves. In this study,…
We study regression using functional predictors in situations where these functions contain both phase and amplitude variability. In other words, the functions are misaligned due to errors in time measurements, and these errors can…
The Nelson-Siegel-Svensson (NSS) interest rate curve model yields a separable nonlinear least-squares problem whose inner linear block is often ill-conditioned because the basis functions become nearly collinear. We analyze this instability…
Empirical research in many social disciplines involves constructs that are not directly observable, such as behaviors. To model them, constructs must be operationalized using their relations with indicators. Structural equation modeling…
Estimation and counterfactual analysis in dynamic structural models rely on assumptions about the dynamic process of latent variables, which may be misspecified. We propose a framework to quantify the sensitivity of scalar parameters of…
The literature shows the possible existence of a problem called collinearity in both Nelson-Siegel and Nelson-Siegel-Svensson models due to the relationship between the slope and curvature components. The presence of this problem and the…
We propose an estimation approach to analyse correlated functional data which are observed on unequal grids or even sparsely. The model we use is a functional linear mixed model, a functional analogue of the linear mixed model. Estimation…
We consider structural vector autoregressions that are identified through stochastic volatility under Bayesian estimation. Three contributions emerge from our exercise. First, we show that a non-centred parameterization of stochastic…
The term structure of interest rates or yield curve is a function relating the interest rate with its own term. Nonlinear regression models of Nelson-Siegel and Svensson were used to estimate the yield curve using a sample of historical…
This paper develops a class of potential outcomes models characterized by three main features: (i) Unobserved heterogeneity can be represented by a vector of potential outcomes and a type describing the manner in which an instrument…
US Yield curve has recently collapsed to its most flattened level since subprime crisis and is close to the inversion. This fact has gathered attention of investors around the world and revived the discussion of proper modeling and…
In many applications, particularly in the natural sciences, the available high-dimensional set of features may contain variables that are not correlated with the response under consideration. Such irrelevant features can, in certain cases,…
Motivated by modern observational studies, we introduce a class of functional models that expands nested and crossed designs. These models account for the natural inheritance of correlation structure from sampling design in studies where…
It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates.…
Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency…
The conditional copula model arises when the dependence between random variables is influenced by another covariate. Despite its importance in modelling complex dependence structures, there are very few fully nonparametric approaches to…