engleski

Application of the Nelson Siegel Yield Curve Model in an Illiquid and Undeveloped Financial Market

This paper examines the possibility of applying the Nelson Siegel yield curve model in the Croatian financial market. In such an illiquid and undeveloped financial market yield curve modeling presents a special challenge primarily regarding the available market data. The use of the model is limited compared to the developed markets and the interpretation of the resulting yield curve requires much more cautiousness. However this paper clearly shows that the yield curve model is able to capture changes in the business cycle according to the macroeconomic theory and therefore provide valuable information to the financial industry and other economic subjects.

yield curve modeling; Nelson Siegel model; illiquid and undeveloped financial market

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