ZERO-COUPON YIELD CURVE FOR NIGERIAN BOND MARKET
Journal Title: Topics in Economics, Business and Management (EBM) - Year 2018, Vol 2, Issue 1
Abstract
The Nigerian bond market has developed to become one of the most liquid in Africa. However, to the best of our knowledge, the Nigerian bond market does not currently have zero-coupon yield curve; what is available is the yield-to-maturity yield curve. This paper seeks to model zero-coupon yield curve for the Nigerian secondary bond market, using piecewise cubic hermite interpolation. It also compares the existing yield curve with the zero-coupon yield curve to analyze the possible effects of relying on only the existing yield curve for financial market decisions. Data is obtained from the FMDQ OTC. The results show that the yield-to-maturity curve used by the Nigerian bond market generally appears flatter and more linear, relative to the modeled zero-coupon yield curve. We believe that adopting the zero-coupon yield curve in addition to the yield-to-maturity curve would add more reliability and accuracy for pricing decisions and monetary policy functions
Authors and Affiliations
Victor Curtis Lartey, Yao Li
Keywords
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- EP ID EP411983
- DOI 10.26480/icefs.01.2018.76.78
- Views 65
- Downloads 0
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