Work

Term Structure Shapes and Their Consistent Dynamics in the Svensson Family

Year: 2025

Type: article

Abstract: ABSTRACT We examine the shapes attainable by the forward‐ and yield‐curve in the widely‐used Svensson family, including the Nelson‐Siegel and Bliss subfamilies. We provide a complete classification of all attainable shapes and partition the parameter space of each family according to these shapes. Building upon these results, we then examine the consistent dynamic evolution of the Svensson family under absence of arbitrage. Our analysis shows that consistent dynamics further restrict the set of attainable shapes, and we demonstrate that certain complex shapes can no longer appear after a deterministic time horizon. Moreover, a single shape (either inverse of normal curves) must dominate in the long‐run.

Source: Mathematical Finance

DOI: 10.1111/mafi.70005

Authors: Martin Keller‐Ressel, Felix Sachse

Institution: Technische Universität Dresden

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,840

Funder: Deutsche Forschungsgemeinschaft