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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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Damir Filipovic, Sander Félix M Willems
2018
Journal Articles

Abstract

Official source

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

About this result

Related concepts (26)

Basic Linear Algebra Subprograms

Basic Linear Algebra Subprograms (BLAS) is a specification that prescribes a set of low-level routines for performing common linear algebra operations such as vector addition, scalar multiplication, dot products, linear combinations, and matrix multiplication. They are the de facto standard low-level routines for linear algebra libraries; the routines have bindings for both C ("CBLAS interface") and Fortran ("BLAS interface").

Smooth structure

In mathematics, a smooth structure on a manifold allows for an unambiguous notion of smooth function. In particular, a smooth structure allows one to perform mathematical analysis on the manifold. A smooth structure on a manifold is a collection of smoothly equivalent smooth atlases. Here, a smooth atlas for a topological manifold is an atlas for such that each transition function is a smooth map, and two smooth atlases for are smoothly equivalent provided their union is again a smooth atlas for This gives a natural equivalence relation on the set of smooth atlases.

Discounting

In finance, discounting is a mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee. Essentially, the party that owes money in the present purchases the right to delay the payment until some future date. This transaction is based on the fact that most people prefer current interest to delayed interest because of mortality effects, impatience effects, and salience effects.

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