Indian G-Sec Market II: Anatomy of Short Rates

MPRA Paper from University Library of Munich, Germany

Abstract: This paper demonstrates how, without mechanically applying any formula like Nelson-Siegel or Nelson-Siegel-Svensson straight cut, a short term yield curve can intuitively be constructed with traded securities and then plugging the gaps with regression and cubic splines on case by case basis, which contains market information and gives enough room to scenario analysis for designing portfolio strategies. Opportunity of short run arbitrage is found non-existent. In terms of further research there is scope of running time series regression of short rates on 3 month MIBOR and one dummy variable for the news of RBI’s auction of dated securities. The patterns of spot rates, forward rates and par rates are similarly flat because the market participants seem not take any trade decisions on the eve of RBI auction and inflationary information content.

Keywords: yield curve; term structure; treasury bill; dated security; short rate; spot rate; par yield; forward rate (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
Date: 2010-12-18
New Economics Papers: this item is included in nep-mac
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https://mpra.ub.uni-muenchen.de/27553/1/MPRA_paper_27553.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/64953/1/MPRA_paper_27553.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/64953/9/MPRA_paper_64953.pdf revised version (application/pdf)

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