Leiria, PauloAlmeida, José Pedro Abreu2013-08-092013-08-092010-05http://hdl.handle.net/10362/10351A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and EconomicsThe purpose of this Work Project is to build a yield curve model for the German Government yield curve containing latent variables (Level, Slope and Curvature), macroeconomic variables (German IFO and Inflation Rate) and a stock market variable (German Stock Index DAX), while studying the yield curve dynamics. The model incorporates the Nelson and Siegel (1987) factor model under a State-Space framework and the estimation results provided a good fitting of the historical yield curve. Additionally, after doing a Variance Decomposition analysis, this project proves the existence of an interaction between the yield curve and the German Macroeconomy/Stock Market.engYield curveState-space modelMacroeconomyStock marketmaster thesis