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Econometrics 2015, 3(4), 733-760; doi:10.3390/econometrics3040733

Forecasting Interest Rates Using Geostatistical Techniques

1
Department of Statistics, Catholic University of the Sacred Heart, Largo Francesco Vito, 1-00168 Rome, Italy
2
Department of Statistical Sciences, University of Rome “La Sapienza”, Viale Regina Elena, 295-00161 Rome, Italy
*
Author to whom correspondence should be addressed.
Academic Editors: Fredj Jawadi, Tony S. Wirjanto, Marc S. Paolella and Nuttanan Wichitaksorn
Received: 31 July 2015 / Revised: 16 October 2015 / Accepted: 29 October 2015 / Published: 9 November 2015
(This article belongs to the Special Issue Recent Developments of Financial Econometrics)
View Full-Text   |   Download PDF [1327 KB, uploaded 9 November 2015]   |  

Abstract

Geostatistical spatial models are widely used in many applied fields to forecast data observed on continuous three-dimensional surfaces. We propose to extend their use to finance and, in particular, to forecasting yield curves. We present the results of an empirical application where we apply the proposed method to forecast Euro Zero Rates (2003–2014) using the Ordinary Kriging method based on the anisotropic variogram. Furthermore, a comparison with other recent methods for forecasting yield curves is proposed. The results show that the model is characterized by good levels of predictions’ accuracy and it is competitive with the other forecasting models considered. View Full-Text
Keywords: term structure; yield curve; forecasting; geostatistics; variogram; Ordinary Kriging term structure; yield curve; forecasting; geostatistics; variogram; Ordinary Kriging
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Arbia, G.; Di Marcantonio, M. Forecasting Interest Rates Using Geostatistical Techniques. Econometrics 2015, 3, 733-760.

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