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Nelson-Siegel- Svensson model: application for Swedish government bonds

Nelson-Siegel- Svensson model: application for Swedish government bonds. MMA 708 - Analytical Finance II Teacher: Jan Roman He Bo Ashot Khalatyan Omogunloye Oluwasanmi. Introduction .

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Nelson-Siegel- Svensson model: application for Swedish government bonds

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  1. Nelson-Siegel-Svensson model: application for Swedish government bonds MMA 708 - Analytical Finance II Teacher: Jan Roman He Bo AshotKhalatyan OmogunloyeOluwasanmi

  2. Introduction • We attempt to calculate term structure of Swedish government bonds using Nelson-Siegel-Svensson model. • Excel/VBA was used to minimize squared difference between actual bond price and model price calculated with Nelson-Siegel-Svensson model.

  3. Nelson-Siegel model for the forward curve: Where, are parameters which are constant to be estimated, and is also constant. Integrating the equation (1) above, we get If we change the variables:

  4. We get: This implies the following spot rate formula: Where are constants to be estimated

  5. Nelson-Siegel model Extension Nelson-Siegel model was extended by Svensson(1994): Deducting the basic Nelson-Siegel model, we get Where are constants to be estimated.

  6. Application in Excel/VBA • With the theory above we collected data from nasdaqomxnordic.com and used Excel Solver and VBA to get the term structure. • VBA codes “P_nse” and “R_nse” where created to calculate bond price and rate using Nelson-Siegel-Svensson model

  7. Excel calculations

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