Pitfalls of Nelson-Siegel Yield Curve Modeling – Part I

[yetanotherquant]

The Nelson-Siegel-[Svensson] Model is a common approach to fit a yield curve. Its popularity might be explained with economic interpretability of its parameters but most likely it is because the European Central Bank uses it. However, what may do for ECB will not necessarily work in all cases: the model parameters are sometimes extremely unstable and fail to converge.

Pitfalls of Nelson-Siegel Yield Curve Modeling - Part I

 

[Daniel Duffy]

Somehow I feel that I read this before on an earlier post?

 

[yetanotherquant]

Somehow I feel that I read this before on an earlier post?

This not, but of course I could have previously mentioned that the NS has these problems.

 

[yetanotherquant]

And the 2nd part:
Pitfalls of Nelson-Siegel Yield Curve Modeling – Part II - what ML and AI can[not] do