Abstract
In this paper we show how to evolve a yield curve over time horizons of the order of years using a simple but eective semiparametric method. The proposed technique preserves in the limit all the eigenvalues and eigenvectors of the observed changes in yields. It also recovers in a satis- factory way several important statistical features (unconditional variance, serial autocorrelation, distrubution of curvatures) of the real-world data. A simple …nancial explanation can be provided for the methodology. The possible …nancial applications are discussed.
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