1932

Abstract

This article reviews the forward rate curve smoothing literature. The key contribution of this review is to link the static curve fitting exercise to the dynamic and arbitrage-free models of the term structure of interest rates. As such, this review introduces more economics to an almost exclusively mathematical exercise, and it identifies new areas for research related to forward rate curve smoothing.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-financial-022114-112903
2014-12-01
2024-06-23
Loading full text...

Full text loading...

/deliver/fulltext/financial/6/1/annurev-financial-022114-112903.html?itemId=/content/journals/10.1146/annurev-financial-022114-112903&mimeType=html&fmt=ahah

Literature Cited

  1. Adams K, van Deventer D. 1994. Fitting yield curves and forward rate curves with maximum smoothness. J. Fixed Income 4:June52–62 [Google Scholar]
  2. Andersen L. 2007. Discount curve construction with tension splines. Rev. Deriv. Res. 10:227–67 [Google Scholar]
  3. Barzanti L, Corradi C. 1998. A note on interest rate term structure estimation using tension splines. Insur. Math. Econ. 22:139–43 [Google Scholar]
  4. Bank for International Settlements. 2005. Zero-coupon yield curves: technical document. Res. Pap. 25, Bank. Int. Settl. http://www.bis.org/publ/bppdf/bispap25.htm
  5. Bjork T, Christensen B. 1999. Interest rate dynamics and consistent forward rate curves. Math. Finance 9:4323–48 [Google Scholar]
  6. Dai Q, Singleton K. 2003. Term structure dynamics in theory and reality. Rev. Financ. Stud. 16:3631–78 [Google Scholar]
  7. Filipovic D. 2001. Consistency problems for Heath-Jarrow-Morton Interest Rate Models. (Lecture Notes in Mathematics) Berlin: Springer: [Google Scholar]
  8. Fisher M, Nychka D, Zervos D. 1995. Fitting the term structure of interest rates with smoothing splines. Discuss. Pap. 95-1, Fed. Reserve Board
  9. Janosi T. 2004. Arbitrage-free forward rate curves and applications. PhD Thesis, Cornell Univ
  10. Jarrow R. 2009. The term structure of interest rates. Annu. Rev. Financ. Econ. 1:69–96 [Google Scholar]
  11. Jarrow R, Turnbull S. 2000. Derivative Securities Chula Vista, CA: South-West. Coll., 2nd ed.. [Google Scholar]
  12. Hagan P, West G. 2006. Interpolation methods for curve construction. Appl. Math. Finance 13:289–129 [Google Scholar]
  13. Heath D, Jarrow R, Morton A. 1992. Bond pricing and the term structure of interest rates: a new methodology for contingent claims valuation. Econometrica 60:77–105 [Google Scholar]
  14. McCulloch J. 1971. Measuring the term structure of interest rates. J. Bus. 44:19–31 [Google Scholar]
  15. Nelson C, Siegel A. 1987. Parsimonious modeling of yield curves. J. Bus. 60:4473–89 [Google Scholar]
  16. Shea G. 1985. Interest rate term structure estimation with exponential splines: a note. J. Finance 40:319–25 [Google Scholar]
  17. Svensson L. 1994. Estimating and interpreting forward interest rates: Sweden 1992–1994. Discuss. Pap. 1051, Cent. Econ. Policy Res
  18. van Deventer D, Imai K, Mesler M. 2013. Advanced Financial Risk Management: Tools and Techniques for Integrated Credit Risk and Interest Rate Risk Management Singapore: Wiley: [Google Scholar]
  19. Vasicek O, Fong HG. 1982. Term structure modeling using exponential splines. J. Finance 37:339–48 [Google Scholar]
  20. Waggoner D. 1997. Spline methods for extracting interest rate curves from coupon bond prices. Work. Pap. 97-10, Fed. Reserve Bank, Atl
/content/journals/10.1146/annurev-financial-022114-112903
Loading
  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error