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No Arbitrage Condition and the Term Structure, its Estimation and Smoothing

In: Lecture Notes in Investment Investment Fundamentals

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  • Eliezer Prisman

Abstract

In Chapter 2, we investigated the meaning of the discount factors, their relation to the no-arbitrage (NA) condition and valuing future cash flows utilizing the present value concept. Some financial instruments, that also fall into the class of derivative securities, are valued based on risk-free discount factors. The valuation concept of these instruments is induced by the NA condition. These securities are valued either by replication or by applying to their cash flow the discount factors…

Suggested Citation

  • Eliezer Prisman, 2020. "No Arbitrage Condition and the Term Structure, its Estimation and Smoothing," World Scientific Book Chapters, in: Lecture Notes in Investment Investment Fundamentals, chapter 3, pages 29-65, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811219566_0003
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    Keywords

    Equality Markets; Bond Markets; Investment Fundamentals;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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