This workshop is half-seminar, half-workshop. \\ \\ HSBC have an on-going problem and they submitted a proposal for an MSc in Applied Stats project on this topic. Unfortunately, the project was submitted too late for this cohort of students. Eurico will talk about "the first approach at the problem" but please be aware that it is an open problem which requires further work. Eurico's abstract is as follows. \\ \\
This article examines modelling yield curves through chaotic dynamical systems whose dynamics can be unfolded using non-linear embeddings in higher dimensions. We then refine recent techniques used in the state space reconstruction of spatially extended time series in order to forecast the dynamics of yield curves.
We use daily LIBOR GBP data (January 2007-June 2008) in order to perform forecasts over a 1-month horizon. Our method seems to outperform random walk and other benchmark models on the basis of mean square forecast error criteria.