Estimation of the yield curve for Costa Rica using combinatorial optimization metaheuristics applied to nonlinear regression

Abstract

The term structure of interest rates or yield curve is a function relating the interest rate with its own term. Nonlinear regression models of Nelson-Siegel and Svensson were used to estimate the yield curve using a sample of historical data supplied by the National Stock Exchange of Costa Rica. The optimization problem involved in the estimation process of model parameters is addressed by the use of metaheuristics: Ant colony, Genetic algorithm, Particle swarm and Simulated annealing. The aim of the study is to improve the local minimum obtained by an optimization method using descent direction. Good results with at least two metaheuristics are achieved, Particle swarm and Simulated annealing.