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I would like to test different methods for fitting a yield curve, like the Nelson-Siegel, cubic splines etc.

I would like to generate random yield to maturity data, that somehow reflects the common observed yields in the markets. I am using R but I appreciate any idea.

Thanks in advance!

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    $\begingroup$ Just take historical data! $\endgroup$ – dm63 Apr 20 '16 at 10:02
  • $\begingroup$ You can simulate Vasicek or CIR models using the "sde" package in R. $\endgroup$ – Egodym Jun 19 '16 at 20:28
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Challenge with completely randomized yields is that it's hard to ensure the data is arbitrage-free. What you can do is either using the data from another market (say take the UK yield and pretend they are in USD) or use randomized resampling of SETS of data.

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  • $\begingroup$ How would you do the resampling? I believe in addition to arbitrage there are non-trivial issues due to correlations/dependence. $\endgroup$ – g g Aug 22 '16 at 10:03
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    $\begingroup$ My understanding is that this is actually why most of the literature on yield curves translates the curves into forward curves. If you simulate random forward yields and then build a yield curve from that, then there shouldn't be arbitrage opportunities. $\endgroup$ – John Feb 14 '17 at 22:13

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