Reproducing kernel Hilbert space methods for modelling the discount curve
Andreas Celary,
Paul Kr\"uhner and
Zehra Eksi
Papers from arXiv.org
Abstract:
We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of no-arbitrage, the admissible discount curves take the form of polynomial, exponential functions. We introduce reproducing kernels that are admissible under no-arbitrage as a tractable regression basis for the estimation problem in calibrating the model to market data. We provide a thorough numerical analysis using real-world treasury data.
Date: 2025-06
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2506.03342
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