International yield curve prediction with common functional principal component analysis
Publication Type
Book Chapter
Publication Date
2-2017
Abstract
We propose an international yield curve predictive model, where common factors are identified using the common functional principal component (CFPC) method that enables a comparison of the variation patterns across different economies with heterogeneous covariances. The dynamics of the international yield curves are further forecasted based on the data-driven common factors in an autoregression framework. For the 1-day ahead out-of-sample forecasts of the US, Sterling, Euro and Japanese yield curve from 07 April 2014 to 06 April 2015, the CFPC factor model is compared with an alternative factor model based on the functional principal component analysis.
Keywords
Yield curve forecasting, Common factors
Discipline
Econometrics | Finance
Research Areas
Finance
Publication
Robustness in Econometrics
Volume
692
Editor
Vladik Kreinovich; Songsak Sriboonchitta; Van-Nam Huynh
First Page
287
Last Page
304
ISBN
9783319507422
Identifier
10.1007/978-3-319-50742-2_17
Publisher
Springer Verlag
Citation
ZHANG, Jiejie; CHEN, Ying; KLOTZ, Stefan; and LIM, Kian Guan.
International yield curve prediction with common functional principal component analysis. (2017). Robustness in Econometrics. 692, 287-304.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5342
Additional URL
https://doi.org/10.1007/978-3-319-50742-2_17