Computing maximally smooth forward rate curves for coupon bonds: An iterative piecewise quartic polynomial interpolation method
AbstractWe present a simple and fast iterative, linear algorithm for simultaneously stripping the coupon payments from and smoothing the yield curve of the term structure of interest rates. The method minimizes pricing errors, constrains initial and terminal conditions of the curves and produces maximally smooth forward rate curves.
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Bibliographic InfoPaper provided by Department of Economics, Florida State University in its series Working Papers with number wp2011_08_03.
Length: 25 pages
Date of creation: Aug 2011
Date of revision:
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-CBA-2011-09-16 (Central Banking)
- NEP-CMP-2011-09-16 (Computational Economics)
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