EMPIRICAL ANALYSIS AND FORECASTING OF MULTIPLE YIELD CURVES

Post-crisis interest rate markets are characterized by multiple (tenor-dependent) yield curves. This paper provides an in-depth empirical analysis of pre– and post–crisis term structures of interest rates. We suggest a... [ view full abstract ]

Post-crisis interest rate markets are characterized by multiple (tenor-dependent) yield curves. This paper provides an in-depth empirical analysis of pre– and post–crisis term structures of interest rates. We suggest a consistent and stable approach for bootstrapping of multiple yield curves which we apply to market data over the time period 2005-2017. Based on the resulting daily tenor-dependent yield curves we determine principal components characterizing the shape of yield curves and interest rate spreads. Finally, we develop a simple dynamic factor model to forecast tenor-dependent term structures of interest rates.