Jens H.E. Christensen (Federal Reserve Bank, San Francisco) speaks at the ESM

"Term Structure Analysis with Big Data"

Analysis of the term structure of interest rates almos t always takes a two-step approach. First, actual bond prices are summarized by interpolated synthetic zero-coupon yields, and second, a small set of these yields are used as the source data for further empirical examination. In contrast, we consider the advantages of a one-step approach that directly analyzes the universe of bond prices. To illustrate the feasibility and desirability of the one step approach, we compare arbitrage-free dynamic term structure models estimated using both approaches. We also provide a simulation study showing that a one-step approach can extract the information in large panels of bond prices and avoid any arbitrary noise introduced from a first-stage interpolation of yields.

Jens Christensen is a Senior Economist in the Economic Research Department of the Federal Reserve Bank of San Francisco, which he joined in 2006 after receiving his PhD in finance from Copenhagen Business School. He also holds an MSc in economics from the University of Copenhagen. His research interests include credit risk modeling, credit risk management, and interest rate term structure modeling. His research in this area is widely cited and has been published in leading academic journals such as the Economic Journal, the Journal of Business and Economic Statistics, the Journal of Econometrics, the Journal of Financial Econometrics, the Journal of Monetary Economics, and the Journal of Money, Credit, and Banking amongst others. Finally, he is a frequent presenter at international conferences on issues related to sovereign bond markets and monetary policy.

This is an ESM research internal seminar. If you would like to attend, please write an email to ESMresearch@esm.europa.eu