QuoteOriginally posted by: amkey04hi.. I am trying to construct the daily 3 month USD forward curve using depo rate up to 3 month, eurodollar up to 2 years and swap up to 30 years. I have some questions on this which I hope someone can help me.a) I am using local interpolation techniques for DF and intermediate swap rates for boostrapping. Unfortunately, my forward curves has many tiny humps espcially between the last eurodollar and the 2 year swap and the long end of the curve. Is there a way to obtain a smooth forward curve? or is't possible to get a smooth forward curve using local interpolation techniques?b) Which parameter has a major influence on the smoothness of the forward curve?c) Can anyone point me to some references on this? I went through the entire wilmott forum but can't seem to find any discussion on forward curve smoothing.Thanks a lot for the helpamkey04"Semi-Empirical Smooth Fit To The Treasury Yield Curve", Paul Diament, The Journal of Fixed Income, June 1993, pp. 55-70
Last edited by AlanB
on December 1st, 2004, 11:00 pm, edited 1 time in total.