Generating a Yield Curve with the Nelson-Siegel-Svensson Method, Excel Library

by Andy Duncan on 28/06/2013

In this Excel Library video, we take a limited amount of bond yield information, and then extrapolate and interpolate from this a good-fitting yield curve which covers all the ‘potential’ rates in-between.

We do this using the Nelson-Siegel-Svensson method, via the Excel data tool, Solver, and minimise residual error squares to create a believable yield curve, despite a lack of complete information.

The main Nelson-Siegel-Svensson block of code used in this video can be copied from the section below:

=(Beta1)+
(Beta2*((1-EXP(-A2/Lambda1))/(A2/Lambda1)))+
(Beta3*((((1-EXP(-A2/Lambda1))/(A2/Lambda1)))-
(EXP(-A2/Lambda1))))+
(Beta4*((((1-EXP(-A2/Lambda2))/(A2/Lambda2)))-
(EXP(-A2/Lambda2))))

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