Author : David Jamieson Bolder
Release : 2008
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Exponentials, Polynomials, and Fourier Series - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Exponentials, Polynomials, and Fourier Series write by David Jamieson Bolder. This book was released on 2008. Exponentials, Polynomials, and Fourier Series available in PDF, EPUB and Kindle. This paper continues the work started by Bolder and Streacute;liski (1999) and considers two alternative classes of models for extracting zero-coupon and forward rates from a set of observed Government of Canada bond and treasury-bill prices. The first class of term-structure estimation methods follows from work by Fisher, Nychka, and Zervos (1994), Anderson and Sleath (2001), and Waggoner (1997). This approach employs a B-spline basis for the space of cubic splines to fit observed coupon-bond prices - as a consequence, we call these the spline-based models. This approach includes a penalty in the generalized least-squares objective function - following from Waggoner (1997) - that imposes the desired level of smoothness into the term structure of interest rates. The second class of methods is called function-based and includes variations on the work of Li et al. (2001), which uses linear combinations of basis functions, defined over the entire term-to-maturity spectrum, to fit the discount function. This class of function-based models includes the model proposed by Svensson (1994). In addition to a comprehensive discussion of these models, the authors perform an extensive comparison of these models' performance in the Canadian marketplace.