Exact Smooth Term Structure Estimation

Damir Filipović and Sander Willems
Additional contact information
Damir Filipović: Ecole Polytechnique Fédérale de Lausanne; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
Sander Willems: Ecole Polytechnique Fédérale de Lausanne; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute

No 16-38, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We introduce a novel method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse such that 1) the market quotes are exactly replicated, 2) the curve has maximal smoothness, 3) no ad hoc interpolation is needed, and 4) no numerical root-finding algorithms are required. We provide a full theoretical framework as well as practical applications for both single-curve and multi-curve estimation.

Keywords: Bootstrap; Discount Curve; Forward Curve; Splines; Term Structure Estimation (search for similar items in EconPapers)
JEL-codes: C61 E43 G12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-06
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ssrn.com/abstract=2794083 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1638

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().