Yield Curve Estimation in Illiquid Bond Markets

HSE Economic Journal Pub Date : 2021-01-01 DOI:10.17323/1813-8691-2021-25-2-177-195

Mikhail Makushkin, V. Lapshin

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引用次数: 2

Abstract

There are many different models for estimation of a yield curve from bond market quotes. These models are well suited for developed markets with high liquidity level and market data readily available. However, this is not always the case for developing markets that are characterized by infrequent trading, heterogeneous liquidity and frequent missing data.In this article we provide a review of the existing and theoretically possible solutions to the problems arising in the process of yield curve construction in developing markets. Our review shows, that all these problems can be effectively tackled by adapting traditional yield curves models to the observer liquidity level of developing market.Heterogeneous liquidity can be addressed by introducing liquidity-based weights into a yield curve model and by removing observations with atypical liquidity from the dataset. To solve missing data problem, we suggest using dynamic yield curve models or recreating missing observations with help of a supplementary model. In special cases when there are not enough bond issues on the market one is recommended to simplify yield curve model and use the data from other markets (e.g. derivative market).The article might be of a great use for market practitioners who operate on developing bond markets as well as for quants who are engaged in construction of yield curves. It also serves as a starting point for a further academic research in the area of term structure modelling in illiquid bond markets.

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非流动性债券市场的收益率曲线估计

根据债券市场报价估算收益率曲线有许多不同的模型。这些模型非常适合流动性水平高、市场数据容易获得的发达市场。然而，发展中市场的情况并非总是如此，这些市场的特点是交易不频繁、流动性不均匀、数据经常缺失。在本文中，我们对发展中市场在收益率曲线构建过程中出现的问题提供了现有的和理论上可能的解决方案。我们的研究表明，将传统的收益率曲线模型与发展中市场的观察者流动性水平相适应，可以有效地解决这些问题。异质性流动性可以通过在收益率曲线模型中引入基于流动性的权重，并从数据集中删除非典型流动性的观测值来解决。为了解决数据缺失问题，我们建议使用动态收益率曲线模型或在补充模型的帮助下重新创建缺失的观测值。在市场上债券发行量不足的特殊情况下，建议简化收益率曲线模型，并使用其他市场(如衍生品市场)的数据。对于在发展中国家债券市场操作的市场从业者以及从事收益率曲线构建的量化分析师来说，这篇文章可能非常有用。它也为在非流动性债券市场的期限结构建模领域进行进一步的学术研究提供了一个起点。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

HSE Economic Journal Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.10

自引率

0.00%

发文量

期刊介绍： The HSE Economic Journal publishes refereed papers both in Russian and English. It has perceived better understanding of the market economy, the Russian one in particular, since being established in 1997. It disseminated new and diverse ideas on economic theory and practice, economic modeling, applied mathematical and statistical methods. Its Editorial Board and Council consist of prominent Russian and foreign researchers whose activity has fostered integration of the world scientific community. The target audience comprises researches, university professors and graduate students. Submitted papers should match JEL classification and can cover country specific or international economic issues, in various areas, such as micro- and macroeconomics, econometrics, economic policy, labor markets, social policy. Apart from supporting high quality economic research and academic discussion the Editorial Board sees its mission in searching for the new authors with original ideas. The journal follows international reviewing practices – at present submitted papers are subject to single blind review of two reviewers. The journal stands for meeting the highest standards of publication ethics.