Re: Svensson overshooting when fitting the bond yield curve.

Posted by KK on Sep 29, 2014; 5:09pm
URL: http://quantlib.414.s1.nabble.com/Svensson-overshooting-when-fitting-the-bond-yield-curve-tp15926p15928.html

Hi SteveGe

What did you get as your parameters? Using excel I managed to get this as a fitted curve - which looks optically ok.

1	3.79%	0.037938
1.5		0.038223
2		0.038586
2.5		0.038958
3	3.97%	0.039314
3.5		0.039648
4		0.03996
4.5		0.040251
5	3.99%	0.040524
5.5		0.040779
6		0.041017
6.5		0.041241
7	4.16%	0.041451
7.5		0.041647
8		0.041831
8.5		0.042004
9		0.042166
9.5		0.042318
10	4.26%	0.04246

beta1	0.045887
beta2	-0.0072
beta3	-0.00558
beta4	-0.00376
lambda1	2.676766
lambda2	0.582564

On Mon, Sep 29, 2014 at 4:39 AM, SteveGe <[hidden email]> wrote:

We use below 5 bonds to fit a yield curve. and then calculate the YTM curve
by calculating some fake bond from 1Y to 10Y with 0.5 year each step.  and
Svensson YTM are off a lot between 1.5Y and 2.5Y.
As evidenced the curve shape is weird.  Is it known issue or I did not use
it properly ?

Date settlementDate = new Date(26, September, 2014);
Settings.instance().setEvaluationDate(settlementDate)
Bond:(effectiveDate:2014-09-26, Period:1Y, Frequency:Annual, coupon:3.79,
yield:3.79)
Bond:(effectiveDate:2014-09-26, Period:3Y, Frequency:Annual, coupon:3.97,
yield:3.97)
Bond:(effectiveDate:2014-09-26, Period:5Y, Frequency:Annual, coupon:3.99,
yield:3.99)
Bond:(effectiveDate:2014-09-26, Period:7Y, Frequency:Annual, coupon:4.16,
yield:4.16)
Bond:(effectiveDate:2014-09-26, Period:10Y, Frequency:Annual, coupon:4.26,
yield:4.26)

Term     YTM
1Y               3.79
1.5Y     4.113
2Y               4.105
2.5Y     4.038
3Y       3.9698
3.5Y     3.94
4Y       3.935498
4.5Y     3.9584
5Y       3.99
5.5Y     4.0346
6Y       4.0768
6.5Y     4.1224
7Y       4.1598
7.5Y     4.1959
8Y               4.22
8.5Y     4.24
9Y               4.25
9.5Y     4.26
10Y      4.257



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