Comparative analysis of interest rate term structures in the Solvency II environment

Gonzalez-Sanchez, Mariano y Rodriguez-Sanchez, Sonia . (2021) Comparative analysis of interest rate term structures in the Solvency II environment. The journal of risk finance, 08 Jun 2021, Vol. 22, Issue 1, pages 16 - 33

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Título Comparative analysis of interest rate term structures in the Solvency II environment
Autor(es) Gonzalez-Sanchez, Mariano
Rodriguez-Sanchez, Sonia
Materia(s) Economía
Abstract Purpose – Solvency-II is the current regulatory framework of insurance companies in the European Union. Under this standard, European Insurance and Occupational Pension Authority (EIOPA), as a regulatory board, has established that the Smith–Wilson (SW) model can be used as the model to estimate interest rate curve. This paper aims to analyze whether this model adjusts to the market curve better than Nelson–Siegel (NS) and whether the values set for the parameters are adequate. Design/methodology/approach – This empirical study analyzes whether the SW interest rate curve shows lower root mean squared errors than the NS curve for a sample of daily prices of Spanish Government bonds between 2014 and 2019. Findings – The results indicate that NS adjusts the market data better, the parameters recommended by the EIOPA correspond to the maximum values observed in the sample period and the current recommended curve for insurance companies underestimates company operations. Originality/value – This paper verifies that the criterion of the last liquid point does not allow for selecting an optimal sample to adjust the curve and criteria based on prices without arbitrage opportunities are more appropriate.
Palabras clave Last liquid point
Nelson–Siegel
Smith–Wilson
Solvency-II
Ultimate forward rate
Editor(es) Emerald Group
Fecha 2021-06-08
Formato application/pdf
Identificador bibliuned:DptoEEC-FCEE-Articulos-Mgonzalez-0014
http://e-spacio.uned.es/fez/view/bibliuned:DptoEEC-FCEE-Articulos-Mgonzalez-0014
DOI - identifier https://doi.org/10.1108/JRF-04-2020-0067
ISSN - identifier 1526-5943
Nombre de la revista The journal of risk finance
Número de Volumen 22
Número de Issue 1
Página inicial 16
Página final 33
Publicado en la Revista The journal of risk finance, 08 Jun 2021, Vol. 22, Issue 1, pages 16 - 33
Idioma eng
Versión de la publicación publishedVersion
Tipo de recurso Article
Derechos de acceso y licencia http://creativecommons.org/licenses/by-nc-nd/4.0
info:eu-repo/semantics/openAccess
Tipo de acceso Acceso abierto
Notas adicionales The registered version of this article, first published in The journal of risk finance, is available online at the publisher's website: Emerald Group, https://doi.org/10.1108/JRF-04-2020-0067
Notas adicionales La versión registrada de este artículo, publicado por primera vez en The journal of risk finance, está disponible en línea en el sitio web del editor: Emerald Group, https://doi.org/10.1108/JRF-04-2020-0067

 
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Creado: Wed, 06 Mar 2024, 21:08:09 CET