Stable Interpolation for the Yield Curve

15 Pages Posted: 14 Nov 2012 Last revised: 9 Aug 2015

Date Written: July 1, 2013

Abstract

We study several interpolation schemes that are adequate for the yield curve construction, and pay attention to their stability under sequential and parallel perturbations. It is found that Hagan and West monotone convex interpolation, tension splines and some monotone Hermite spline don’t always create stable yield curves. A specific monotone Hermite spline interpolation is however stable.

Keywords: yield curve, finance

Suggested Citation

Le Floc'h, Fabien, Stable Interpolation for the Yield Curve (July 1, 2013). Available at SSRN: https://ssrn.com/abstract=2175002 or http://dx.doi.org/10.2139/ssrn.2175002

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

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