TY  - JOUR
AU  - Christensen,Jens H. E.
AU  - Diebold,Francis X.
AU  - Rudebusch,Glenn D.
TI  - The Affine Arbitrage-Free Class of: Nelson-Siegel Term Structure Models
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13611
PY  - 2007
Y2  - November 2007
UR  - http://www.nber.org/papers/w13611
L1  - http://www.nber.org/papers/w13611.pdf
N1  - Author contact info:
Jens Christensen
Federal Reserve Bank of San Francisco
Economic Research, MS 1130
101 Market Street
San Francisco, CA  94105-9967
E-Mail: jens.christensen@sf.frb.org

Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu

Glenn Rudebusch
Federal Reserve Bank of San Francisco
Economic Research, MS 1130
101 Market Street
San Francisco, CA  94105-9967
Tel: 415-974-3173
E-Mail: glenn.rudebusch@sf.frb.org
AB  - 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.
ER  -