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Estimation of the term structure of interest rates with German government bonds

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Abstract

In this paper we estimate the term structure of interest rates using multiple linear regression. The regression equation is derived, from a no-arbitrage condition. Considering only bonds with the same coupon payment date and excluding possible collinearities results in a substantial reduction of the mean squared error as measure of mispricing in comparison to Bußmann (1989).

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Authors and Affiliations

  1. Institut für Entscheidungstheorie und Unternehmensforschung, Universität Karlsruhe (TH), Postfach 69 80, D-7500, Karlsruhe 1

    G. Lassak

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  1. G. Lassak
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Additional information

This paper is based on a section of the author's dissertation. The author would like to thank Wolfgang Bühler, Johannes Bußmann and participants of the conference of Money, Banking, Finance, and Insurance in Karlsruhe, Germany, 1990, for helpful comments on an earlier version of this paper. For helpful suggestions on the current version I would like to thank Thomas Burdelski, Torsten Lüdecke, and Günter Bamberg.

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Lassak, G. Estimation of the term structure of interest rates with German government bonds. Statistical Papers 32, 321–330 (1991). https://doi.org/10.1007/BF02925508

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  • DOI: https://doi.org/10.1007/BF02925508

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