Estimating the long rate and its volatility

Estimating the long rate and its volatility

We estimate the long rate and its volatility within the Svensson framework. The procedure that best extrapolates the longest observable rate and its volatility is a 2-dimensional grid search conditioned on the ridge regression suggested by Annaert et al. (2013). •We estimate the unobservable long ra...

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Veröffentlicht in:Economics letters 2015-04, Vol.129, p.100-102
Hauptverfasser: Annaert, Jan, Claes, Anouk G.P., De Ceuster, Marc J.K., Zhang, Hairui
Format: Artikel
Sprache:eng
Schlagworte:
Estimating techniques
Estimation
Long rate
Multidimensional analysis
Nelson–Siegel model
Regression analysis
Ridge regression
Studies
Svensson model
Volatility
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Beschreibung
Zusammenfassung:We estimate the long rate and its volatility within the Svensson framework. The procedure that best extrapolates the longest observable rate and its volatility is a 2-dimensional grid search conditioned on the ridge regression suggested by Annaert et al. (2013). •We estimate the unobservable long rate and its volatility with the Svensson model.•Ridge regression is used to solve the multicollinearity problem.•Our method fits the long rate and its volatility best.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2015.02.022