A Non-parametric Approach to Term Structure Estimation
Conference paper
Abstract
Term structures of interest rates play an important role in finance and are used for pricing interest rate dependant securities. In this paper a new approach to term structure estimation is presented that has a number of advantages over current practice:
-
it does not depend on any parametric model, and therefore, does allow for arbitrary shapes of zero coupon curves and is widely applicable;
-
only a small set of data is required;
-
it is extremely robust; and
-
with respect to the common trade-off between accuracy and smoothness it is optimal.
Preview
Unable to display preview. Download preview PDF.
References
- Chambers, D.R., Carleton, W.T., Waldman, D.W. (1984): A New Approach to Estimation of the Term Structure of Interest Rates“, Journal of Financial and Quantitative Analysis 19, pp 233–251.CrossRefGoogle Scholar
- Graybill, F.A. (1983): Matrices with Applications in Statistics ( 2nd ed ), Wadsworth, Belmont, California.Google Scholar
- Härdle, W. (1991): Smoothing Techniques,SpringerGoogle Scholar
- Mcculloch, J.H. (1971): Measuring the Term Structure of Interest Rates“, Journal of Business, pp 19–31.Google Scholar
- Shea, G.S. (1984): Pitfalls in Smoothing Interest Rate Term Structure Data: Equilibrium Models and Spline Approximations“, Journal of Financial and Quantitative Analysis 19, pp 253–269.CrossRefGoogle Scholar
- Vasicek, O.A., Fong, H.G. (1982): Term Structure Modelling Using Exponential Splines“, Journal of Finance 37, pp 339–348.CrossRefGoogle Scholar
Copyright information
© Physica-Verlag Heidelberg 1994