Publication

Exact Smooth Term-Structure Estimation

Damir Filipovic, Sander Félix M Willems
2018
Journal Articles

Abstract

We present a nonparametric method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse. The discount curve reproduces the market quotes perfectly, has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations. We provide a full theoretical framework as well as several practical applications.

Official source

https://infoscience.epfl.ch/entities/publication/b053ed75-59bb-4e9e-a82f-3be6dd51b5c9

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Exact Smooth Term-Structure Estimation

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