workingPaper
A segmented and observable Yield Curve
Fecha
2019-11-01Autor
Castro, Carlos
Peña, Juan Felipe
Rodriguez Revilla, Cristhian Andres
Institución
Resumen
Following Almeida et al. (2018) we implement a segmented three factor Nelson-Siegel model for the yield curve using daily observable bond prices and short term inter-bank rates for Colombia. The flexible estimation for each segment (short, medium, and long) provides an improvement over the classical Nelson-Siegel approach in particular in terms of in-sample and out-of-sample forecasting performance. A segmented term structure model based on observable bond prices, provides a tool closer to the needs of practitioners in terms of reproducing the market quotes and allowing for independent local shocks in the different segments of the curve.