Estimating a fuzzy term structure of interest rates using fuzzy regression techniques

Sánchez, Jorge de Andrés; Terceño, Antonio

doi:10.1016/s0377-2217(02)00854-8

Cited by 25 publications

(3 citation statements)

References 20 publications

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“…Similar approaches in different applications with fuzzy parameters can be found in [34][35][36]. Obviously it is almost impossible to derive i q by Eq.…”

Section: A Fuzzy Random Model Of Cournot Gamementioning

confidence: 80%

The Cournot production game with entropy spreads

Dang

Hong

2010

The 40th International Conference on Computers &Amp; Indutrial Engineering

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This paper extends the conventional Cournot model to fuzzy random environment, where the market demand and supply are with two-fold uncertainty of randomness and fuzziness.We propose a methodology for obtaining the equilibrium quantity in such environment. Different from previous studies, the equilibrium quantity of each firm is a fuzzy number rather than a crisp value. Our method follows two steps of the apex problem and the spreads problem to approach the equilibrium production quantity. In our model, the production quantity of each firm is intuitively a triangular fuzzy number due to the nature of uncertainty of randomness and fuzziness. We solve for the equilibrium quantity with the highest membership value from the apex problem. The resulting outcome derived from the apex problem is further utilized to solve the spreads problem. The fuzzy equilibrium quantity can be obtained from the solution of the apex problem and spreads problem.

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“…Similar approaches in different applications with fuzzy parameters can be found in [34][35][36]. Obviously it is almost impossible to derive i q by Eq.…”

Section: A Fuzzy Random Model Of Cournot Gamementioning

confidence: 80%

The Cournot production game with entropy spreads

Dang

Hong

2010

The 40th International Conference on Computers &Amp; Indutrial Engineering

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“…We mention several of these works. Gimeno and Nave (2009) employ genetic algorithms to fit Nelson-Siegel and Svensson parametric forms to the Spanish bond data, There are attempts to use fuzzy mathematics (De Andrés Sánchez and Gómez, 2004), B-splines (Shea, 1984; Steeley, 1991; Lin, 2002), tension splines (Barzanti and Corradi, 1998; Andersen, 2007) and L 1 -splines (Chiu et al , 2008). Hagan and West (2006) compare of different spline and interpolation techniques for a model dataset.…”

Section: Introductionmentioning

confidence: 99%

A nonparametric Bayesian approach to term structure fitting

Lapshin

2019

SEF

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Purpose This paper aims to illustrate how a Bayesian approach to yield fitting can be implemented in a non-parametric framework with automatic smoothing inferred from the data. It also briefly illustrates the advantages of such an approach using real data. Design/methodology/approach The paper uses an infinite dimensional (functional space) approach to inverse problems. Numerical computations are carried out using a Markov Chain Monte-Carlo algorithm with several tweaks to ensure good performance. The model explicitly uses bid-ask spreads to allow for observation errors and provides automatic smoothing based on them. Findings A non-parametric framework allows to capture complex shapes of zero-coupon yield curves typical for emerging markets. Bayesian approach allows to assess the precision of estimates, which is crucial for some applications. Examples of estimation results are reported for three different bond markets: liquid (German), medium liquidity (Chinese) and illiquid (Russian). Practical implications The result shows that infinite-dimensional Bayesian approach to term structure estimation is feasible. Market practitioners could use this approach to gain more insight into interest rates term structure. For example, they could now be able to complement their non-parametric term structure estimates with Bayesian confidence intervals, which would allow them to assess statistical significance of their results. Originality/value The model does not require parameter tuning during estimation. It has its own parameters, but they are to be selected during model setup.

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“…On practical grounds, the curve is assumed to belong to a family of parametric functions (Nielson-Siegel functional Nelson and Siegel (1987), polynomial splines, Smith and Wilson (2001)) and its construction consists in finding the underlying parameters that best fits observed market quotes for all available maturities. In de Andrés Sánchez and Gómez (2004), the interest-rate term-structure is estimated from bid-ask spreads of underlying instruments using fuzzy regression techniques. Hagan and West (2006) provide a review of different interpolation techniques for curve construction.…”

Section: Introductionmentioning

confidence: 99%

Kriging of financial term-structures

Cousin

Maatouk

Rullière

2016

European Journal of Operational Research

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Due to the lack of reliable market information, building financial term-structures may be associated with a significant degree of uncertainty. In this paper, we propose a new term-structure interpolation method that extends classical spline techniques by additionally allowing for quantification of uncertainty. The proposed method is based on a generalization of kriging models with linear equality constraints (market-fit conditions) and shape-preserving conditions such as monotonicity or positivity (no-arbitrage conditions). We define the most likely curve and show how to build confidence bands. The Gaussian process covariance hyper-parameters under the construction constraints are estimated using cross-validation techniques. Based on observed market quotes at different dates, we demonstrate the efficiency of the method by building curves together with confidence intervals for term-structures of OIS discount rates, of zero-coupon swaps rates and of CDS implied default probabilities. We also show how to construct interest-rate surfaces or default probability surfaces by considering time (quotation dates) as an additional dimension. JEL classification C63; E43; G12

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Estimating a fuzzy term structure of interest rates using fuzzy regression techniques

Cited by 25 publications

References 20 publications

The Cournot production game with entropy spreads

The Cournot production game with entropy spreads

A nonparametric Bayesian approach to term structure fitting

Kriging of financial term-structures

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