# Tag Info

## Hot answers tagged fixed-income

3

Jojo, once again the paper is about Nelson-Siegel and not Nelson-Siegel svensson (the former allows for one hump whereas the latter for two humps). Jojo, in practice people often start by fixing $\lambda$ then estimate the model by OLS and check the squared errors of the model. Then change $\lambda$ and repeat the procedure. This is highly efficient, and ...

2

Zero coupon rates are outputs, not inputs. As mentioned in the other post, given the parameters (say the initial guesses), you can easily compute the theoretical prices of each bond, which can then be converted into their theoretical yields (standard price to yield conversion). You should minimize the residuals between these theoretical yields and the market ...

1

A simple example might help. You need to transform your coupon bonds in equivalent zeros. Imagine that you have 5 coupon bonds and you are at the end of 2011: Coupon, Maturity, Price = 5.25% 2012 101.69 Coupon, Maturity, Price = 4.5% 2013 101.52 Coupon, Maturity, Price = 5.5% 2014 104.49 Coupon, Maturity, Price = 5% 2015 103.35 From the first one you can ...

1

You really don't even need to put them into matrices, which I feel is confusing you more than helping... For each bond, you have a list of cash flows ($c_i$'s). For each cash flow, you can compute the corresponding discount factor ($d(t_i)$'s). Sum up the discounted cash flows gets you the theoretical price: $P = \sum_i c_i d(t_i)$. Repeat this for every ...

1

It is simply the difference between "today" and the cash flow date in years. A 30-years bond paying semi-annual coupons has 60 cash flows, and each cash flow has its own "TTM".

1

Say at time $t$ , the cash flows of some bond $b$ can be described by the two vectors $\textbf{c}$ and $\textbf{t}$, containing information about the value of the nominal cash flows and cash flow times in years, respectively. Similarly, if we have a range of bonds $B = \{ b_1, ..., b_n\}$ that trade on a market, the matrices $\textbf{C}$ and $\textbf{T}$ ...

Only top voted, non community-wiki answers of a minimum length are eligible