A Dynamic Model for the Forward Curve

• Main Authors: Chua, Choong Tze, Dean, Foster, Ramaswamy, Krishna, Stine, Robert
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2490; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3489/viewcontent/ChuaFosterRamaswamyStine.pdf
• Institution: Singapore Management University

This paper develops and estimates a dynamic arbitrage-free model for the current forward curve as the sum of (i) an unconditional component, (ii) a maturity-specific component and (iii) a date-specific component. The model combines features of the Preferred Habitat model,the Expectation Hypothesis a...