DM STIR PCA Model: Introducing the Model
- By Henry Occleston
- 5 min read
Summary
- We produce a PCA model covering DM rates curves, which has so far produced very positive performance.
- As part of our growing suite of PCA models, we now extend the analysis to target a selection of DM swap curves in the <2Y bucket.
- We find the model works best for the USD curve, and less well for EUR and GBP, as such, at this stage we include only the USD in our analysis.
- The model is not currently flagging any dislocation in the USD short term interest rate curve.
- Our analysis suggests that the USD STIR model performs best when the Fed is hiking or cutting.
Summary
- We produce a PCA model covering DM rates curves, which has so far produced very positive performance.
- As part of our growing suite of PCA models, we now extend the analysis to target a selection of DM swap curves in the <2Y bucket.
- We find the model works best for the USD curve, and less well for EUR and GBP, as such, at this stage we include only the USD in our analysis.
- The model is not currently flagging any dislocation in the USD short term interest rate curve.
- Our analysis suggests that the USD STIR model performs best when the Fed is hiking or cutting.
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