JSIAM Letters
Online ISSN : 1883-0617
Print ISSN : 1883-0609
ISSN-L : 1883-0617
Fourier estimation method applied to forward interest rates
Nien-Lin LiuMaria Elvira Mancino
ジャーナル フリー

2012 年 4 巻 p. 17-20


Principal component analysis (PCA) is a general method to analyse the factors of the term structure of interest rates. There are usually two or three factors. However, it is shown by Liu that when we apply PCA to forward rates, not spot rates, we need more factors to explain $95\%$ of variability. In order to verify the robustness of this result, we introduce another method based on Fourier series, which is proposed by Malliavin and Mancino. The results reconfirm the observation of Liu with different data sets. In particular, the Fourier series method gives us similar results to PCA.

© 2012 The Japan Society for Industrial and Applied Mathematics
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