Forecasting Nelson Siegel

The Nelson Siegel model provides a means of forecasting changes in the yield curve.

Level Parameter Trends

The following is a chart of the level parameter of a fitted nelson siegel model for the year 2025.


The ambitious analyst may try to utilize Time Series Mehtods to measure and forecast trends in the data. When applied to all four Nelson Siegel parameters, and forecast can be create.

Hedging Unwanted Risk

Once a pattern has been detected in one or more of the Nelson Siegel parameters, the trader will wish to place a trade that takes a position on the noticed pattern, and hedges the other factors. This can be done by investing in four instruments (see Hedging Nelson Siegel)