Convex Structure of the Constrained Least Square Problem for Estimating the Forward Rate Sequence
We will show that the constrained least square problem proposed in Konno and Takase  for estimating the forward rate sequence by using the market prices of default-free non-callable coupon bonds is in fact a convex minimization problem under more general conditions than those assumed in the subsequent paper by the same authors . Consequently, the constrained least square approach can generate a smooth and accurate forward rate sequence very fast by standard convex minimization algorithms. Copyright Kluwer Academic Publishers 1997
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Volume (Year): 4 (1997)
Issue (Month): 2 (May)
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References listed on IDEAS
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- McCulloch, J Huston, 1971.
"Measuring the Term Structure of Interest Rates,"
The Journal of Business,
University of Chicago Press, vol. 44(1), pages 19-31, January.
- Tom Doan, . "RATS program to estimate term structure with cubic splines," Statistical Software Components RTZ00019, Boston College Department of Economics.
- Vasicek, Oldrich A & Fong, H Gifford, 1982. " Term Structure Modeling Using Exponential Splines," Journal of Finance, American Finance Association, vol. 37(2), pages 339-48, May.
- Delbaen, F. & Lorimier, Sabine, 1992. "Estimation of the yield curve and the forward rate curve starting from a finite number of observations," Insurance: Mathematics and Economics, Elsevier, vol. 11(4), pages 259-269, December.
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