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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Jens Christensen

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Working Papers and Chapters

November 2008An Arbitrage-Free Generalized Nelson-Siegel Term Structure Model
with Francis X. Diebold, Glenn D. Rudebusch: w14463
The Svensson generalization of the popular Nelson-Siegel term structure model is widely used by practitioners and central banks. Unfortunately, like the original Nelson-Siegel specification, this generalization, in its dynamic form, does not enforce arbitrage-free consistency over time. Indeed, we show that the factor loadings of the Svensson generalization cannot be obtained in a standard finance arbitrage-free affine term structure representation. Therefore, we introduce a closely related generalized Nelson-Siegel model on which the no-arbitrage condition can be imposed. We estimate this new arbitrage-free generalized Nelson-Siegel model and demonstrate its tractability and good in-sample fit.
November 2007The Affine Arbitrage-Free Class of: Nelson-Siegel Term Structure Models
with Francis X. Diebold, Glenn D. Rudebusch: w13611
We derive the class of arbitrage-free affine dynamic term structure models that approximate the widely-used Nelson-Siegel yield-curve specification. Our theoretical analysis relates this new class of models to the canonical representation of the three-factor arbitrage-free affine model. Our empirical analysis shows that imposing the Nelson-Siegel structure on this canonical representation greatly improves its empirical tractability; furthermore, we find that improvements in predictive performance are achieved from the imposition of absence of arbitrage.

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

 
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