A Nonparametric Method For Term Structure Fitting With Automatic Smoothing

Victor Lapshin and Vadim Kaushanskiy ()
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Vadim Kaushanskiy: National Research University Higher School of Economics

HSE Working papers from National Research University Higher School of Economics

Abstract: We present a new nonparametric method for fitting the term structure of interest rates from bond prices. Our method is a variant of the smoothing spline approach, but within our framework we are able to determine the smoothing coefficient automatically from the data using generalized crossvalidation or maximum likelihood estimates. We present an effective numerical algorithm to simultaneously find the term structure and the optimal smoothing coefficient. Finally, we compare the proposed nonparametric fitting method with other parametric and nonparametric methods to show its superior performance.

Keywords: regularization; smoothing splines; term structure of interest rates. (search for similar items in EconPapers)
JEL-codes: C14 G12 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014
New Economics Papers: this item is included in nep-ecm
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Published in WP BRP Series: Financial Economics / FE, December 2014, pages - 30

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Journal Article: A nonparametric method for term structure fitting with automatic smoothing (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:39/fe/2014

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