|
PureBytes Links
Trading Reference Links
|
This is a good plain-English description, and you can follow the links
to learn more.
http://www.econbrowser.com/archives/2006/04/the_yield_curve.html
<http://www.econbrowser.com/archives/2006/04/the_yield_curve.html>
Do you see the two equations on the page preceded by an "F"? In Excel,
if you plug in NORMSDIST for the "F" along with the values for the
spread and Fed Funds rate it will give you the probability, as in:
=NORMSDIST(-2.17-.76*-.22+.35*5.25)
Using current spread (^TNX-^IRX) and Fed Funds values the reading will
be 43.44%.
S.
--- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@xxx> wrote:
>
> Sebastian,
>
> Any chance of a reference to the Wright source(s) or better still a
> doc of the relevant page or chapter?
>
> Brian.
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "sebastiandanconia"
> sebastiandanconia@ wrote:
> >
> >
> > Thanks for the response, but I've already put together an indicator
> > based on your idea. It looks just like a regular yield spread (10-
> Year
> > yield minus 3-month yield), only with the zero line adjusted for
> the Fed
> > Funds rate as per the Wright Model formula.
> >
> > The problem is that at the 50% probability level (the zero line on
> the
> > indicator) there are too many false-positive signals, it's not
> until the
> > probability gets up into the mid-60% range that recession becomes a
> real
> > threat. That's why I'd like to be able to calculate the actual
> > probability percentages.
> >
> > In looking at the math more closely, though, I have to say that I
> > honestly didn't understand how difficult a problem this was when I
> asked
> > for assistance. I assumed that it was just a question of combining
> the
> > two formulas I provided and I just needed a little conceptual help
> to
> > get over the hump, but it's far more involved and I know now that
> it was
> > too much to ask.
> >
> > There are two simpler workarounds, though. One, calculate the
> > probabilities in Excel, import them into AB as a fake ticker and
> refer
> > to them using Foreign() when creating buy/sell rules. And two,
> optimize
> > the zero line or the levels on the indicator I already have.
> >
> >
> >
> > Luck,
> >
> > Sebastian
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Ton Sieverding" <ton.sieverding@>
> > wrote:
> > >
> > > Sorry for the Dutch language Sebastian but this is more or less
> how I
> > see it. Perhaps something for an AFL formula. On the Y-axis the
> > difference between 10 Year Treasury and 3 month T-Bill. On the X-
> axis
> > the FED rate. Plots above the blue line have a probability of less
> than
> > 50% and below the blue line are higher than 50%. Of course you can
> try
> > to calculate the probability of a recession but ...
> > >
> > > Ton.
> > >
> > >
> > >
> > >
> > > ----- Original Message -----
> > > From: sebastiandanconia
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Sent: Wednesday, February 07, 2007 7:20 PM
> > > Subject: [amibroker] Need some math help to code NORMSDIST into
> AB.
> > >
> > >
> > >
> > > I came across what I consider to be a valuable stock
> market/economic
> > indicator, the Wright Model "B" yield-curve indicator. Using this
> > formula in Excel:
> > >
> > > Probability = NORMSDIST(-2.17 - 0.76 x S + 0.35 x R)
> > >
> > > where "S" is the spread (10-Year Treasury yield minus 3-month T-
> Bill
> > yield) and "R" is the Fed Funds rate, it gives the probability of
> > economic recession within the next 4 quarters. (Only about 44% right
> > now, so there's some good news. I envision using this as a market-
> exit
> > indicator, warning when conditions are about to turn really ugly for
> > both the stock market and the economy. )
> > >
> > > This formula:
> > >
> > > Z(x) = (1/(sqrt(2*pi()))*exp(-x^2/2))
> > >
> > > appears to be the actual math represented by the NORMSDIST
> function. I
> > believe AB supports all the operations in this formula.
> > >
> > > My problem is that I'm not math-savvy enough to make the leap from
> > here to turn this into a complete AB formula. I don't know what
> > operation the NORMSDIST formula performs on the Wright Model part, I
> > don't know what the "x" variable is supposed to be...there's no end
> to
> > what I don't know.:)
> > >
> > > Any help from my superiors in the math field (undoubtedly a VERY
> large
> > club) would be greatly appreciated.
> > >
> > >
> > >
> > > Luck to all,
> > >
> > > Sebastian
> > >
> >
>
Content-Description: "AVG certification"
No virus found in this incoming message.
Checked by AVG Free Edition.
Version: 7.5.432 / Virus Database: 268.17.31/676 - Release Date: 2/8/2007 3:04 PM
|