termstrc (version 1.3.7)

fwr_dl: Forward Rate Calculation according to Diebold/Li.

Description

Calculate forward rates according to Diebold/Li(2006).

Usage

fwr_dl(beta, m, lambda)

Arguments

beta

parameter vector ${\bm{\beta}} = \left(\beta_0,\beta_1,\beta_2\right)$.

m

maturity or maturity vector.

lambda

$=\frac{1}{\tau_1}$, a scalar

Value

• The function returns the calculated forward rate (vector).

Details

The forward rate for a maturity $m$ is calculated according to the following formula:

$$f(m,\bm{\beta},\lambda) = \beta_0+\beta_1\exp\left(-m\lambda\right)+\beta_2\left[\left(m\lambda\right)\exp\left(-m\lambda\right)\right].$$

References

F.X. Diebold and C. Li: Forecasting the Term Structure of Government Bond Yields. Journal of Econometrics, 130:337--364.

See Also

fwr_sv,fwr_ns, forwardrates

Examples

fwr_dl(beta=c(0.03,0.02,0.01),1:30,lambda=1/5)