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Risk structure of interest rates: an empirical analysis for Deutschemark‐denominated bonds
Author(s) -
Düllmann Klaus,
UhrigHomburg Marliese,
Windfuhr Marc
Publication year - 2000
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00129
Subject(s) - bond , interest rate , econometrics , yield curve , economics , government bond , sample (material) , interest rate risk , bond valuation , term (time) , estimation , credit risk , actuarial science , financial economics , statistics , mathematics , monetary economics , finance , chemistry , physics , chromatography , quantum mechanics , management
This paper empirically studies the risk structure of interest rates for Deutschemark‐denominated bonds. For this purpose, we estimate term structures of interest rates using the parsimonious fitting function of Nelson and Siegel (1987) for virtually risk free Government bonds and five different rating categories classified by Moody’s ratings (Aaa, Aa, A, Baa, Ba). The sample period covers the time interval from July 1990 to December 1996. We investigate the pricing errors resulting from our estimation procedure and analyse credit spreads over the term structure of Government bonds.