On the Estimation of Term Structure Models and An Application to the United States

Abstract

This paper discusses the estimation of models of the term structure of interest rates. Afterreviewing the term structure models, specifically the Nelson-Siegel Model and Affine TermStructureModel, this paper estimates the terms structure of Treasury bond yields for the UnitedStates with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.