Dynamics of Interest Rate Curve by Functional Auto-regressionAlexei Onatski () and Vladislav Kargin () No 229, Econometric Society 2004 North American Summer Meetings from Econometric Society Abstract: The paper applies methods of functional data analysis – functional auto-regression, principal components and canonical correlations – to the study of the dynamics of interest rate curve. In addition, it introduces a novel statistical tool based on the singular value decomposition of the functional cross-covariance operator. This tool is better suited for prediction purposes as opposed to either principal components or canonical correlations. Based on this tool, the paper provides a consistent method for estimating the functional auto-regression of interest rate curve. The theory is applied to estimating dynamics of Eurodollar futures rates. The results suggest that future movements of interest rates are predictable only at very short and very long horizons Keywords: Functional auto-regression; term structure dynamics; principal components; canonical correlations; singular value decomposition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecm:nasm04:229 Access Statistics for this paper More papers in Econometric Society 2004 North American Summer Meetings from Econometric Society Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.