DCOBS: forecasting the term structure of interest rates with dynamic constrained smoothing B-Splines

• Ano de defesa: 2017
• Autor(a) principal: Mineo, Eduardo Phillipe
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Instituição de defesa: Biblioteca Digitais de Teses e Dissertações da USP
• Palavras-chave em Português: Análise numérica; B-splines; Brazilian bonds; Estrutura a termo; Interest rates; Não-arbitragem; No-arbitrage; Numerical analysis; Séries-temporais; Taxa de juros; Term structure; Time-series; Títulos públicos
• Link de acesso: http://www.teses.usp.br/teses/disponiveis/45/45132/tde-16012018-111318/

The Nelson-Siegel framework published by Diebold and Li a decade ago created an important benchmark and originated several works in the literature of forecasting term structure of interest rates. For instance, the Arbitrage-Free Nelson-Siegel framework improved predictive performance by imposing no-arbitrage conditions to the Nelson-Siegel framework. However, these frameworks were built on the top of a parametric curve model that may lead to poor fitting for sensible term structure shapes affecting forecast results. We propose DCOBS with no-arbitrage restrictions to forecast the term structure. It is built on the top of the nonparametric constrained smoothing Bsplines yield curve model. This curve model has shown to be an optimum solution between financial integrity and respect to yield curve shapes. Even though this curve model may provide more volatile forward curves than parametric models, they are still more accurate than those from Nelson-Siegel frameworks. A software was developed with a complete implementation of yield curve fitting techniques discussed in this paper. DCOBS has been evaluated for ten years of brazilian government bond data and it has shown good consistence with stylized facts of yield curves. The results of DCOBS are promising, specially in short-term forecast, and has shown greater stability and lower root mean square errors than Arbitrage-Free Nelson-Siegel.