Department of Economics and Business Economics

Term Structure Analysis with Big Data

Research output: ResearchWorking paper

Documents

  • rp17_31

    Final published version, 586 KB, PDF-document

  • Martin Møller Andreasen
  • Jens H.E. Christensen
    Jens H.E. ChristensenFederal Reserve Bank of San FranciscoUnited States
  • Glenn D. Rudebusch
    Glenn D. RudebuschFederal Reserve Bank of San FranciscoUnited States
Analysis of the term structure of interest rates almost always takes a two-step approach. First, actual bond prices are summarized by interpolated synthetic zero-coupon yields, and second, a small set of these yields are used as the source data for further empirical examination. In contrast, we consider the advantages of a one-step approach that directly analyzes the universe of bond prices. To illustrate the feasibility and desirability of the onestep approach, we compare arbitrage-free dynamic term structure models estimated using both approaches. We also provide a simulation study showing that a one-step approach can extract the information in large panels of bond prices and avoid any arbitrary noise introduced from a first-stage interpolation of yields.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages49
StatePublished - 18 Sep 2017
SeriesCREATES Research Papers
Number2017-31

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