termstrc (version 1.0)

nelson_estim: Term Structure and Credit Spread Estimation with Nelson/Siegel and Svensson Method

Description

Term structure and credit spread estimation with Nelson/Siegel and Svensson method

Usage

nelson_estim(group,
             bonddata,
             matrange = "all",
             method = "Nelson/Siegel",
             fit = "prices",
             weights = "none",
             startparam, control = list(eval.max = 1000))

Arguments

group

vector defining the group of bonds used for the estimation,\newlinee.g. c("GERMANY","AUSTRIA")

bonddata

a dataset of bonds in list format

matrange

use "all" for no restrictions, or restrict the maturity range used for the estimation with c(lower,upper)

method

"Nelson/Siegel" or "Svensson"

fit

use "prices" ("yields") for minimising the squared price (yield) error

weights

If a weighted minimisation of the squared price deviation is required, use "duration", otherwise "none"

startparam

matrix of start parameters, for the Nelson/Siegel (Svensson) method 4 (6) parameters for each each group are required (one row per group).

control

list of control parameters for the function nlminb

Value

• The function nelson_estim returns a list with the following elements or sub-lists:
• group
  groups used from data set
• matrange
  includes the chosen maturity range
• method
  includes the chosen estimation method
• fit
  includes the chosen objective function
• weights
  type of weighting used in optimisation
• n_group
  the number of groups used for the optimisation
• zcy_curves
  values for plotting the estimated zero-coupon yield curves
• scurves
  values for plotting the spread curves
• cf
  cashflows matrix for all specified groups
• m
  maturity matrix for all specified groups
• duration
  duration, weighted duration and duration based weights
• p
  dirty prices
• phat
  estimated bond prices
• y
  bond yields
• yhat
  theoretical bond yields calculated with the estimated bond prices phat
• opt_result
  the optimal parameter vector for the specified groups according to the chosen estimation approach

Details

group{The first element of the vector will be used as the reference country for the credit spread estimation. The group can be either a vector of groups or a scalar.} bonddata{The package is tailored to the included data sets. Therefore the structure and the naming convention of other used data sets has to be identical. Use the function str() to explore the structure of the provided datasets.} startparam{For the estimation a matrix of start parameters must be provided. The estimation is very sensitive to the start parameters, due to multiple local minima of the objective functions. Therefore a great effort should be invested in finding a good start parameter set. } control{Please refer to the documentation of the function mlimnb.}

References

Charles R. Nelson and Andrew F. Siegel (1987): Parsimonious modeling of yield curves. The Journal of Business, 60(4):473--489. Lars E.O. Svensson (1994): Estimating and interpreting forward interest rates: Sweden 1992 -1994. Technical Reports 4871, National Bureau of Economic Research. David Bolder and David Streliski (1999): Yield Curve Modelling at the Bank of Canada. Technical Report No 84 Bank of Canada

See Also

for another estimation method see splines_estim

Examples

demo(euro01)