![]() ![]() Moreover, many methods lead one to derive hedging strategies that are not intuitively reasonable. As will be seen, many of these methods suffer from problems: they posit unreasonable expections, or are not even necessarily arbitrage free. ![]() The criterion for inclusion in this survey is that the method has been implemented by a software vendor (or indeed an inhouse developer) as a viable option for yield curve interpolation. In the case of yield curves the issue of bootstrapping is reviewed and how the interpolation algorithm should be intimately connected to the bootstrap itself is discussed. This paper surveys a wide selection of the interpolation algorithms that are in use in financial markets for construction of curves such as forward curves, basis curves, and most importantly, yield curves.
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