Profiting from Mean-Reverting Yield Curve Trading Strategies
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.
Journal of Fixed Income
Chua, Choong Tze; Koh, Winston T. H.; and Ramaswamy, Krishna.
Profiting from Mean-Reverting Yield Curve Trading Strategies. (2006). Journal of Fixed Income. 4, (4), 20-33. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/456
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