Estimating the Yield Curve for the Malaysian Bond Market Using Parsimony Method

Modeling of Bond Yield Curve Using Cubic Bezier Curve

“…𝐺(𝑡 𝑖 ) = (1 − 𝑡 𝑖 ) 3 3.043 + 3𝑡 𝑖 (1 − 𝑡 𝑖 ) 2 7.575 + 3𝑡 𝑖 2 (1 − 𝑡 𝑖 ) 6.3789 + 𝑡 𝑖 3 6.93 (11) The curved obtained from the cubic bezier curve estimation results on August 4 th , 2021 data are presented in Figure 3 Figure 3(a) shows that the longer the time to maturity is from the Bond, the greater the Bond yield obtained. The Bond yield has a significant increase from the start of time to maturity to 𝑇 = 9.95 time to maturity.…”

“…Equation ( 12) is obtained from the equation of the cubic bezier curve on August 5 th , 2021 data. 𝐵(𝑡 𝑖 ) = (1 − 𝑡 𝑖 ) 3 3.172 + 3𝑡 𝑖 (1 − 𝑡 𝑖 ) 2 7.4546 + 3𝑡 𝑖 2 (1 − 𝑡 𝑖 ) 6.8509 + 𝑡 𝑖 3 6.65…”

“…The Nelson-Siegel method is a basic for modeling bond yield curves. The Nelson-Siegel method later developed into the Nelson-Siegel-Svensson and Extended Nelson-Siegel methods [2]. After that, other bond yield curve modeling methods were developed by the researchers.…”

“…Several bond yield curve modeling methods are widely used by researchers, including Dynamic Nelson-Siegel Model [3]- [6], Factor augmented VAR and the Nelson and Siegel [7], the Nelson-Siegel model with GARCH and EGARCH volatility [8], Segmented Term Structure Models [9], dynamic natural cubic spline model [10], tractable dynamic factor models [11], and Machine Learning Techniques [12]. In modeling the bond yield curve, the parsimony method is needed [2]. Moreover, a curve pattern that minimizes error is required.…”