Level-Slope-Curvature - Fact or Artefact?

Arbeitspapier

The first three factors resulting from a principal components analysis of term structure data are in the literature typically interpreted as driving the level, slope and curvature of the term structure. Using slight generalisations of theorems from total positivity, we present sufficient conditions under which level, slope and curvature are present. These conditions have the nice interpretation of restricting the level, slope and curvature of the correlation surface. It is proven that the Schoenmakers-Coffey correlation matrix also brings along such factors. Finally, we formulate and corroborate our conjecture that the order present in correlation matrices causes slope.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 05-083/2

Classification and Topics

• Classification: Wirtschaft ; Econometric Modeling: General ; Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General ; General Financial Markets: General (includes Measurement and Data)
• Subject: Principal components analysis ; correlation matrix ; total positivity ; oscillation matrix ; Schoenmakers-Coffey matrix ; Zinsstruktur ; Korrelation ; Faktorenanalyse ; Theorie ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lord, Roger ; Pelsser, Antoon
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/86522
• Last update: 10.03.2025, 11:42 AM CET