Forecasting the Term Structure of Interest Rates Using Neural Networks

Forecasting the Term Structure of Interest Rates Using Neural Networks

Sumit Kumar Bose (Indian Institute of Management, India), Janardhanan Sethuraman (Indian Institute of Management, India) and Sadhalaxmi Raipet (Indian Institute of Management, India)
Copyright: © 2006 |Pages: 15
DOI: 10.4018/978-1-59140-670-9.ch007
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The term structure of interest rates holds a place of prominence in the financial and economic world. Though there is a vast array of literature on the issue of modeling the yield curve, there is virtually no mention of the issue of forecasting the yield curve. In the current chapter, we apply neural networks for the purpose of forecasting the zero-coupon yield curve. First the yield curve is modeled from the past data using the famous Nelson-Siegel model. Then, forecasting of the various parameters of the Nelson-Siegel yield curve is done using two different techniques: the multilayer perceptron and the feed-forward network. The forecasted Nelson-Siegel parameters are then used to predict the yield and the price of the various bonds. Results show the superiority of the feed-forward network over the multilayer perceptron for the purposes of forecasting the term structure of interest rates.

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Table of Contents
Joarder Kamruzzaman, Rezaul Begg, Ruhul Sarker
Joarder Kamruzzaman, Rezaul Begg, Ruhul Sarker
Chapter 1
Joarder Kamruzzaman, Ruhul A. Sarker
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Artificial Neural Networks: Applications in Finance and Manufacturing
Chapter 2
Ruhul A. Sarker, Hussein A. Abbass
Artificial Neural Networks (ANNs) have become popular among researchers and practitioners for modeling complex real-world problems. One of the... Sample PDF
Simultaneous Evolution of Network Architectures and Connection Weights in Artificial Neural Networks
Chapter 3
David Encke
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Neural Network-Based Stock Market Return Forecasting Using Data Mining for Variable Reduction
Chapter 4
Yuehui Chen, Ajith Abraham
The use of intelligent systems for stock market prediction has been widely established. In this paper, we investigate how the seemingly chaotic... Sample PDF
Hybrid-Learning Methods for Stock Index Modeling
Chapter 5
John Fulcher, Ming Zhang, Shuxiang Xu
Financial time-series data is characterized by nonlinearities, discontinuities, and high-frequency multipolynomial components. Not surprisingly... Sample PDF
Application of Higher-Order Neural Networks to Financial Time-Series Prediction
Chapter 6
Masoud Mohammadian, Mark Kingham
In this chapter, an intelligent hierarchical neural network system for prediction and modelling of interest rates in Australia is developed. A... Sample PDF
Hierarchical Neural Networks for Modelling Adaptive Financial Systems
Chapter 7
Sumit Kumar Bose, Janardhanan Sethuraman, Sadhalaxmi Raipet
The term structure of interest rates holds a place of prominence in the financial and economic world. Though there is a vast array of literature on... Sample PDF
Forecasting the Term Structure of Interest Rates Using Neural Networks
Chapter 8
Joarder Kamruzzaman, Ruhul A. Sarker, Rezaul K. Begg
In today’s global market economy, currency exchange rates play a vital role in national economy of the trading nations. In this chapter, we present... Sample PDF
Modeling and Prediction of Foreign Currency Exchange Markets
Chapter 9
Tong-Seng Quah
Artificial neural networks’ (ANNs’) generalization powers have in recent years received admiration of finance researchers and practitioners. Their... Sample PDF
Improving Returns on Stock Investment through Neural Network Selection
Chapter 10
Eldon Gunn, Corinne MacDonald
This chapter provides some examples from the literature of how feed-forward neural networks are used in three different contexts in manufacturing... Sample PDF
Neural Networks in Manufacturing Operations
Chapter 11
M. Imad Khan, Saeid Nahavandi, Yakov Frayman
This chapter presents the application of a neural network to the industrial process modeling of high-pressure die casting (HPDC). The large number... Sample PDF
High-Pressure Die-Casting Process Modelling Using Neural Networks
Chapter 12
Sergio Cavalieri, Paolo Maccarrone, Roberto Pinto
The estimation of the production cost per unit of a product during its design phase can be extremely difficult, especially if information about... Sample PDF
Neural Network Models for the Estimation of Product Costs: An Application in the Automotive Industry
Chapter 13
Tapabrata Ray
Surrogate-assisted optimization frameworks are of great use in solving practical computationally expensive process-design-optimization problems. In... Sample PDF
A Neural-Network-Assisted Optimization Framework and Its Use for Optimum-Parameter Identification
Chapter 14
George A. Rovithakis, Stelios E. Perrakis, Manolis A. Christodoulou
In this chapter, a neuroadaptive scheduling methodology, approaching machine scheduling as a control-regulation problem, is presented and evaluated... Sample PDF
Artificial Neural Networks in Manufacturing: Scheduling
Chapter 15
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This chapter describes the application of neural networks to recognition of lubrication defects typical to industrial cold forging process. The... Sample PDF
Recognition of Lubrication Defects in Cold Forging Process with a Neural Network
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