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Research Article | Open Access

Distribution-free uncertainty quantification for daily treasury yield curves with functional principal component forecasting and vector autoregression

Mervenur Sözen1Fikriye Kabakcı2 ( )Çağlar Sözen3
Independent researcher, Turkey; ORCID: 0000-0001-5603-5382
Faculty of Arts and Sciences, Department of Mathematics, Recep Tayyip Erdoğan University, Rize, Turkey; ORCID: 0000-0001-6266-1902
Görele School of Applied Sciences, Department of Finance and Banking, Giresun University, Giresun, Turkey; ORCID: 0000-0002-3732-5058
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Abstract

We investigated one-step-ahead daily U.S. Treasury yield-curve forecasting and provided distribution-free uncertainty quantification for the entire term structure. Using constant-maturity yields from the Federal Reserve Bank of St. Louis (FRED), we first transformed the discrete maturity panel into a dense common maturity grid through a knot-consistent ridge-regularized cubic B-spline smoother, enabling coherent curve-level evaluation. For point prediction, we modeled the yield curve as a functional time series and forecasted functional principal component (FPCA) scores with a vector autoregression (VAR). We benchmarked FPCA–VAR against two widely used alternatives: The dynamic Nelson–Siegel (DNS) model and a raw-maturity PCA–VAR (RawPC–VAR) baseline. To quantify predictive uncertainty without imposing parametric distributional assumptions, we constructed rolling studentized conformal prediction bands using a simultaneous (sup-type) nonconformity score and a moving calibration window; the associated distribution-free validity was taken in the usual conformal (exchangeable) sense and treated as an operational benchmark—rather than a literal time-series guarantee—under temporal dependence. We therefore audited calibration directly on the test block and, to probe regime heterogeneity, implemented an ex-ante Mondrian conformal variant based on a curve-shock indicator that partitioned days into HIGH and LOW regimes. Out-of-sample results showed that FPCA–VAR achieved the lowest integrated squared error and yielded substantially tighter predictive bands than DNS, while Mondrian calibration improved interpretability by revealing and partially reducing regime-dependent coverage imbalances.

CLC number: 62M10, 62G20

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AIMS Mathematics
Pages 5692-5718

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Cite this article:
Sözen M, Kabakcı F, Sözen Ç. Distribution-free uncertainty quantification for daily treasury yield curves with functional principal component forecasting and vector autoregression. AIMS Mathematics, 2026, 11(3): 5692-5718. https://doi.org/10.3934/math.2026234

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Received: 16 December 2025
Revised: 10 February 2026
Accepted: 27 February 2026
Published: 15 March 2026
©2026 the Author(s), licensee AIMS Press.

This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0)