Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction
| dc.contributor.advisor | Huang, Chun-Sung | |
| dc.contributor.author | Reddy, Desigan | |
| dc.date.accessioned | 2019-02-19T13:44:06Z | |
| dc.date.available | 2019-02-19T13:44:06Z | |
| dc.date.issued | 2018 | |
| dc.date.updated | 2019-02-19T10:31:19Z | |
| dc.description.abstract | Using a Principal Component Analysis (PCA) approach, we investigate the sovereign yield spread term structure of the BRICS economies against the U.S. We show that the term structure for these markets are primarily driven by three latent factors which can be classified as the spread level, slope and curvature factors. We further postulate that a country’s yield curve contains valuable information about its future economic state and as such the PCA derived spread factors, which are based on the differences between sovereign yield curves, encapsulates material macro-economic information between the countries. In light of this, we show that augmenting the traditional Uncovered Interest Rate Parity model (UIRP) with these factors improves the models predictive accuracy of exchange rate movements. | |
| dc.identifier.apacitation | Reddy, D. (2018). <i>Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction</i>. (). University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/29691 | en_ZA |
| dc.identifier.chicagocitation | Reddy, Desigan. <i>"Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction."</i> ., University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2018. http://hdl.handle.net/11427/29691 | en_ZA |
| dc.identifier.citation | Reddy, D. 2018. Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction. University of Cape Town. | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Reddy, Desigan AB - Using a Principal Component Analysis (PCA) approach, we investigate the sovereign yield spread term structure of the BRICS economies against the U.S. We show that the term structure for these markets are primarily driven by three latent factors which can be classified as the spread level, slope and curvature factors. We further postulate that a country’s yield curve contains valuable information about its future economic state and as such the PCA derived spread factors, which are based on the differences between sovereign yield curves, encapsulates material macro-economic information between the countries. In light of this, we show that augmenting the traditional Uncovered Interest Rate Parity model (UIRP) with these factors improves the models predictive accuracy of exchange rate movements. DA - 2018 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2018 T1 - Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction TI - Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction UR - http://hdl.handle.net/11427/29691 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/29691 | |
| dc.identifier.vancouvercitation | Reddy D. Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction. []. University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2018 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/29691 | en_ZA |
| dc.language.iso | eng | |
| dc.publisher.department | Department of Finance and Tax | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.publisher.institution | University of Cape Town | |
| dc.subject.other | Financial and Risk Management | |
| dc.title | Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MCom |