Yield curve modelling via two parameter process

Pekerten, Uygar
Random field models have provided a flexible environment in which the properties of the term structure of interest rates are captured almost as observed. In this study we provide an overview of the forward rate random fiield models and propose an extension in which the forward rates fluctuate along with a two parameter process represented by a random field. We then provide a mathematical expression of the yield curve under this model and sketch the prospective utilities and applications of this model for interest rate management.


Yield curve estimation and prediction with Vasicek Model
Bayazıt, Derviş; Hayvafi, Azize; Department of Financial Mathematics (2004)
The scope of this study is to estimate the zero-coupon yield curve of tomorrow by using Vasicek yield curve model with the zero-coupon bond yield data of today. The raw data of this study is the yearly simple spot rates of the Turkish zero-coupon bonds with different maturities of each day from July 1, 1999 to March 17, 2004. We completed the missing data by using Nelson-Siegel yield curve model and we estimated tomorrow yield cuve with the discretized Vasicek yield curve model.
Analysis of stochastic and non-stochastic volatility models.
Özkan, Pelin; Ayhan, Hüseyin Öztaş; Department of Statistics (2004)
Changing in variance or volatility with time can be modeled as deterministic by using autoregressive conditional heteroscedastic (ARCH) type models, or as stochastic by using stochastic volatility (SV) models. This study compares these two kinds of models which are estimated on Turkish / USA exchange rate data. First, a GARCH(1,1) model is fitted to the data by using the package E-views and then a Bayesian estimation procedure is used for estimating an appropriate SV model with the help of Ox code. In order...
One-factor interest rate models : analytic solutions and approximations
Yolcu, Yeliz; Körezlioğlu, Hayri; Department of Financial Mathematics (2005)
The uncertainty attached to future movements of interest rates is an essential part of the Financial Decision Theory and requires an awareness of the stochastic movement of these rates. Several approaches have been proposed for modeling the one-factor short rate models where some lead to arbitrage-free term structures. However, no definite consensus has been reached with regard to the best approach for interest rate modeling. In this work, we briefly examine the existing one-factor interest rate models and ...
Experimental design with short-tailed and long-tailed symmetric error distributions
Yilmaz, Yıldız Elif; Akkaya, Ayşen; Department of Statistics (2004)
One-way and two-way classification models in experimental design for both balanced and unbalanced cases are considered when the errors have Generalized Secant Hyperbolic distribution. Efficient and robust estimators for main and interaction effects are obtained by using the modified maximum likelihood estimation (MML) technique. The test statistics analogous to the normal-theory F statistics are defined to test main and interaction effects and a test statistic for testing linear contrasts is defined. It is ...
Comparison of regression techniques via Monte Carlo simulation
Mutan, Oya Can; Ayhan, Hüseyin Öztaş; Department of Statistics (2004)
The ordinary least squares (OLS) is one of the most widely used methods for modelling the functional relationship between variables. However, this estimation procedure counts on some assumptions and the violation of these assumptions may lead to nonrobust estimates. In this study, the simple linear regression model is investigated for conditions in which the distribution of the error terms is Generalised Logistic. Some robust and nonparametric methods such as modified maximum likelihood (MML), least absolut...
Citation Formats
U. Pekerten, “Yield curve modelling via two parameter process,” M.S. - Master of Science, Middle East Technical University, 2005.