TABLE 5
FROM:
Global term structure modelling using principal component analysis
Arcady Novosyolov and Daniel Satchkov
BACK TO ARTICLETable 5. Comparison of performing PCA on volatilities separately vs performing it on the residual of regressing volatilities on the first three PCs from the term structure (US volatilities and US LIBOR term structure)
| ST Vol from residual | ST Vol separately | LT Vol from residual | LT Vol separately |
|---|---|---|---|
| 0.70 | 0.72 | 0.49 | 0.55 |
| 0.85 | 0.87 | 0.81 | 0.83 |
| 0.90 | 0.91 | 0.90 | 0.92 |
| 0.93 | 0.94 | 0.95 | 0.96 |
| 0.96 | 0.96 | 0.97 | 0.97 |
| 0.98 | 0.98 | 0.98 | 0.99 |
| 0.99 | 0.99 | 0.99 | 0.99 |
| 1.00 | 1.00 | 0.99 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
| 1.00 | 1.00 | 1.00 | 1.00 |
The values shown are cumulative proportions of variation of implied volatility data explained by the PCs.