?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=http%3A%2F%2Fmiis.maths.ox.ac.uk%2Fmiis%2F190%2F&rft.title=Correlation+Structures+Corresponding+to+Forward+Rates&rft.creator=Lee%2C+Seung+Youn&rft.subject=Finance&rft.description=In+finance%2C+there+is+a+constant+effort+to+model+future+prices+of+stocks%2C+bonds%2C+and+commodities%3B+the+ability+to+predict+future+behaviour+provides+important+information+about+the+underlying+structure+of+these+securities.+While+it+has+become+common+to+model+a+single+stock+using+the+Black-Scholes+formulation%2C+the+modelling+of+bond+prices+requires+one+to+simulate+the+change+of+interest+rates+as+a+function+of+their+maturity%2C+which+requires+one+to+model+the+movement+of+an+entire+yield+curve.+If+one+studies+the+spectral+decomposition+of+the+correlation+matrix+corresponding+to+the+spot+rates+from+this+curve%2C+then+one+finds+that+the+top+three+components+can+explain+nearly+all+of+the+data%3B+in+addition%2C+this+same+structure+is+observed+for+any+bond+or+commodity.+In+his+2000+paper%2C+Ilias+Lekkos+%5B4%5D+proposes+that+such+results+are+an+artefact+due+to+the+implicit+correlation+between+spot+rates%2C+and+that+the+analysis+should+instead+be+performed+using+forward+rates.+In+this+paper%2C+we+discuss+the+results+obtained+for+the+spectral+structure+of+the+correlation+matrices+of+forward+rates%2C+and+investigate+a+model+for+this+associated+structure.+The+paper+is+divided+into+four+parts%2C+covering+forward+rates+background+material%2C+principal+components+analysis%2C+yield+curve+modelling%2C+and+conclusions+and+research+extensions.&rft.date=2003&rft.type=Study+Group+Report&rft.type=NonPeerReviewed&rft.format=application%2Fpdf&rft.language=en&rft.identifier=http%3A%2F%2Fmiis.maths.ox.ac.uk%2Fmiis%2F190%2F1%2Fcargill.pdf&rft.identifier=++Lee%2C+Seung+Youn++(2003)+Correlation+Structures+Corresponding+to+Forward+Rates.++%5BStudy+Group+Report%5D+++++