English, Article edition: PCA-BASED EX-ANTE FORECASTING OF SWAP TERM STRUCTURES OLIVER BLASKOWITZ; HELMUT HERWARTZ

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Bookmark: http://trove.nla.gov.au/version/15748
Physical Description
  • article
Language
  • English

Edition details

Title
  • PCA-BASED EX-ANTE FORECASTING OF SWAP TERM STRUCTURES
Author
  • OLIVER BLASKOWITZ
  • HELMUT HERWARTZ
Physical Description
  • article
Notes
  • In this study, we forecast the term structure of EURIBOR swap rates by means of rolling vector autoregressive (VAR) models. In advance, a principal component analysis (PCA) is adopted to reduce the dimensionality of the term structure. To statistically assess the forecasting performance for particular rates and the level, slope and curvature of the swap term structure, we rely on the HenrikksonâMerton statistic. Economic performance is investigated by means of cash flows implied by alternative trading strategies. Finally, a data-driven, adaptive model selection strategy to "predict the best forecasting model" out of a set of 100 alternative PCA/​VAR implementations is shown to outperform forecasting schemes that rely on global homogeneity of the term structure.
  • Adaptive ex-ante forecasting, EURIBOR swap rates, term structure
  • RePEc:wsi:ijtafx:v:12:y:2009:i:04:p:465-489
Language
  • English
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