Modeling the Volatility of US Bond Yields

Project Description

In this project, we will explore the volatility structure of US Government Bond Yields. Essentially all financial assets exhibit a phenomenon called volatility clustering where low and high volatility regimes follow each other. The alternating volatility regimes are a focus for risk management and investment decisions. We will use the well-known GARCH ([Generalized AutoRegressive Conditional Heteroskedasticity](https://en.wikipedia.org/wiki/Autoregressive_conditional_heteroskedasticity)) method to explore the statistical properties of financial time series data. This project assumes background knowledge on time series analysis, GARCH modeling, plotting and uses packages `xts` and `rugarch`. The historical yield data are published by the US Federal Reserve Data Releases and imported from Quandl, [https://www.quandl.com/data/FED/SVENY](https://www.quandl.com/data/FED/SVENY),

Project Tasks

1. 1
   Volatility changes over time
2. 2
   Plotting the evolution of bond yields
3. 3
   Make the difference
4. 4
   The US yields are no exceptions, but maturity matters
5. 5
   Let's dive into some statistics
6. 6
   GARCH in action
7. 7
   Fitting the 20-year maturity
8. 8
   What about the distributions? (Part 1)
9. 9
   What about the distributions? (Part 2)
10. 10
    A final quiz