Semi-Closed Solutions in Yield Curve Attribution
$25
We extend our model for yield curve attribution, which was recently introduced in “A New Empirical Model for Yield Curve Attribution” (Vieira, 2011), to derive a formula for the yield return that is not based on a linear approximation. We preform new derivations for the formulas of roll, shift, and twist returns that eliminate all summations so that equations are simpler and more transparent. Finally, we do a historical analysis of the return components for a five-year period and show that the shift and yield returns are responsible for most of the treasury returns, whereas the roll, twist and shape returns have a much smaller contribution.
Author: Maria De Sousa Vieira, Ph.D., Thomson Reuters
We extend our model for yield curve attribution, which was recently introduced in "A New Empirical Model for Yield Curve Attribution" (Vieira, 2011), to derive a formula for the yield return that is not based on a linear approximation. We preform new derivations for the formulas of roll, shift, and twist returns that eliminate all summations so that equations are simpler and more transparent. Finally, we do a historical analysis of the return components for a five-year period and show that the shift and yield returns are responsible for most of the treasury returns, whereas the roll, twist and shape returns have a much smaller contribution.
