engleski

How to evaluate the yield curve in a transition economy

Evaluation of the yield curve is standard on financial markets in developed countries. A well-evaluated yield curve reflects and forecasts the condition of an economy and is an important factor in decision making of all participants on the financial market and beyond it. With development of financial market in transition countries an increasing need arises for a well-evaluated yield curve. This paper firstly presents the elements of the new theory of the term structure of interest rates, i.e. the most renowned single factor diffusion models of interest rates (CIR and Vasicek model), and then applies it on the Croatian government securities market. Although in Croatia, considering the development level of financial market, there are many limiting factors in application of these models, the authors have evaluated and explained the yield curve for 30 dates in the course of 2001.

yield curve ; new term structure models ; Croatian financial market

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