Profiting from Mean-Reverting Yield Curve Trading Strategies

Author

Choong Tze CHUA, Singapore Management UniversityFollow
Winston T. H. KOH, Singapore Management UniversityFollow
Krishna Ramaswamy, Wharton School of Business, University of Pennsylvania

Publication Type

Journal Article

Version

submittedVersion

Publication Date

3-2006

Abstract

This article studies a set of yield curve trading strategies that are based on the view that the yield curve mean reverts to an unconditional curve. These mean-reverting trading strategies exploit deviations in the level, slope, and curvature of the yield curve from historical norms. Some mean-reverting strategies were found to have significant positive profits. Furthermore, the profitability of one of these strategies significantly outperforms, on a risk-adjusted basis, alternative strategies of an investment bond or equity index.

Discipline

Econometrics | Finance

Research Areas

Applied Microeconomics; Finance

Publication

Journal of Fixed Income

Volume

15

Issue

4

First Page

20

Last Page

33

ISSN

1059-8596

Identifier

10.3905/jfi.2006.627836

Citation

CHUA, Choong Tze; KOH, Winston T. H.; and Ramaswamy, Krishna. Profiting from Mean-Reverting Yield Curve Trading Strategies. (2006). Journal of Fixed Income. 15, (4), 20-33.
Available at: https://ink.library.smu.edu.sg/soe_research/456

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.3905/jfi.2006.627836