Computational Actuarial Science with R

Chapter 12

Yield Curves and Interest Rates Models

Sergio S. Guirreri

Accenture S.p.A. Milan, Italy

12.1 A Brief Overview of the Yield Curve and Scenario Simulation

In recent years, the simulation of scenarios of macroeconomic variables has became a crucial issue. Institutional operators, such as national banks, insurance companies, and investment banks must evaluate different scenarios of financial and macroeconomic variables before adopting a monetary policy or promoting a new pension plan. Economic variables such as interest rates and monetary aggregates are often studied by economists to forecast the path of the economy or to predict an ongoing recession. The relationship among interest rates at different maturities contains relevant information ...