Yield Curve Interpolation

Manishs · February 11th, 2003, 9:37 am

where can I get information on yield curve interpolation methods?

egmont · February 11th, 2003, 11:18 am

HULL and the internet.

Pat · February 11th, 2003, 12:45 pm

Risk Magazine has an article a year or so ago that outlined the different methods in widespread use. I think the author was from City Hall (that is, Bloomberg)

lak · February 11th, 2003, 2:40 pm

Hi Manishs, You can get the information from the Bloomberg Resources. As far as i know there are mainly two ways of doing it, one is linear and the other one is splining. If you want to get your short rates to be continuous in the second derivative you can use cubic splines.

DavidJN · February 11th, 2003, 2:45 pm

Try the working paper on creating swap zero curves by Uri Ron on the Bank of Canada website. The author goes in quite a bit of detail on the three commonly used methods: 1) linear, 2) log-linear and 3) cubic spline.

Kane · February 13th, 2003, 11:58 am

Here are some references that I have found usefulPeter Zangari: An investigation into term structure estimation methods for RiskMetrics, in RiskMetrics Monitor, Third quarter 1997 (www.riskmetrics.com)Ken Adams: Smooth Interpolation of Yield Curves, in ALGO Research Quarterly, vol 4, numbers 1-2, March/June 2001(www.algorithmics.com)Uri Ron: A Practical Guide to Swap Curve Construction, Bank of Canada Working Paper, 2000-17Robert Bliss: Testing Term Structure Estimation Methods, Federal Reserve Bank of Atlanta, Working Paper 96-12a, November 1996...just to mention a few.If You can't find them I have some of them in pdf (I think)Kane

Manishs · February 14th, 2003, 2:07 am

Kane,can you send me the PDFs. my email id is manishs@kesdee.comthanks a lotmanish

Kane · February 14th, 2003, 5:55 am

I just e-mailed them to you......if you didn't get them...just let me know and we'll try something elseKane

Tigor · March 14th, 2003, 8:28 am

Hi Kane, Could you send them to me too?My email is stigor@bi.go.idThanks a lot.

mrbadguy · March 14th, 2003, 8:54 pm

For a basical introduction to interpolation meaning, check this:http://lib-www.lanl.gov/numerical/bookcpdf/c3-3.pdfHere I collected a little bibliography on fitting curves (spline, interpolation, and so on):Brown, Saad,'Hybrid Krylov method for non linear systems of equations', Siam, Sci, STAT.Comput.11, 3 may 1990James, Webber, "Interest Rate Modelling" Wiley, 2000Vasicek, Gifford Fong, "Term Structure Modelling using Exponential Splines", Journal of Finance, 37; 2 may 1982Finally, if you're interested in zero curves and smoothest forward-rate interpolation, try this good paper by Ken Adams. If I'm not wrong it was just recommended sorry for double recommendation. Have a nice week end.

Kane · March 17th, 2003, 6:09 am

Since there seems to be some difficulties sending these papers through e-mail...I will post them here in case someone else is interestedatached zip file contains the following articles...Peter Zangari: An investigation into term structure estimation methods for RiskMetrics, in RiskMetrics Monitor, Third quarter 1997 (www.riskmetrics.com)Ken Adams: Smooth Interpolation of Yield Curves, in ALGO Research Quarterly, vol 4, numbers 1-2, March/June 2001(www.algorithmics.com)Uri Ron: A Practical Guide to Swap Curve Construction, Bank of Canada Working Paper, 2000-17

Kane · March 17th, 2003, 6:11 am

zip file contains the paper:Robert Bliss: Testing Term Structure Estimation Methods, Federal Reserve Bank of Atlanta, Working Paper 96-12a, November 1996...enjoyKane

mrbadguy · March 17th, 2003, 12:16 pm

Thank you very much Kane, mathematics of yield curve is my next research target and your papers are useful.Rgds.

Kane · March 19th, 2003, 9:49 am

In case you do not have these papers…The functional form of yield curves, by Vincent Brousseau, May 2002, (ECB Working Paper No. 148)Available from ECB website www.ecb.int/pub/wp/wp.htm...and I also attached two other nice papers about yield curve modellingModeling the Term Structure of Interest Rates: A Review of the Literature by Rajna Gibson et al, (Also available from Risk Lab Switzerland website www.risklab.ch/Papers.html#TermStructureSurvey)Yield Curve Models: a mathematical review by Kerry Back

mrbadguy · March 19th, 2003, 12:40 pm

Kane, thanks a lot for your stuff. I've got to study now.Do not hesitate to contact me if you need help.