Template-type: ReDIF-Paper 1.0
Author-Name: Yvan Lengwiler
Author-Name-First: Yvan
Author-Name-Last: Lengwiler
Author-Person: ple28
Author-Name: Prof. Dr. Carlos Lenz
Author-Name-First: Carlos
Author-Name-Last: Lenz
Author-Person: ple608
Title: Intelligible Factors for the Yield Curve
Abstract: We construct a factor model of the yield curve and specify time series processes for these factors, so that the innovations are mutually orthogonal. At the same time, the factors are constructed in such a way that they assume clear, intuitive interpretations. The resulting "intelligible factors" should prove useful for investment professionals to discuss expectations about yield curves and the implied dynamics. Moreover, they allow us to distinguish announced changes of the monetary policy stance versus monetary policy surprises, which are ctually rare. We identify two such events, namely September 11, 2001, and the Fed reaction to the recent subprime crisis.
Length: 30 pages
Creation-Date: 2008
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2008/working_paper_2008_02
File-Format: text/html
Number: 2008-02
Classification-JEL: E43
Keywords: yield curve, factor models, structural vector autoregression, monetary policy
Handle: RePEc:snb:snbwpa:2008-02