termstrc (version 1.1.1)

svensson: Spot Rate Function according to Svensson

Description

This function calculates the spot rates for certain maturity dates and a parameter vector according to Svensson (1994).

Usage

svensson(beta, m)

Arguments

beta

a vector of parameters $\bm{\beta} = (\beta_0, \beta_1,\beta_2,\tau_1, \beta_3, \tau_2)$.

m

one maturity (or a vector of maturities).

Value

• Returns a vector consisting of the calculated spot rates.

Details

The spot rate according to Svensson for a maturity $m$ is calculated using the following function: $$s(m,\text{bm}\beta )={\beta }_0+{\beta }_1\frac{1-\exp (-\frac{m}{{\tau }_1})}{\frac{m}{{\tau }_1}}+{\beta }_2(\frac{1-\exp (-\frac{m}{{\tau }_1})}{\frac{m}{{\tau }_1}}-\exp (-\frac{m}{{\tau }_1}))+{\beta }_3(\frac{1-\exp (-\frac{m}{{\tau }_2})}{\frac{m}{{\tau }_2}}-\exp (-\frac{m}{{\tau }_2}))$$

References

Lars E.O. Svensson (1994): Estimating and Interpreting Forward Interest Rates: Sweden 1992 -1994. Technical Reports 4871, National Bureau of Economic Research.

Examples

svensson(c(0.07,0.3,0.05,0.1,0.08,0.2),1:30)