Spline methods for extracting interest rate curves from coupon bond prices

Daniel Waggoner

No 97-10, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Cubic splines have long been used to extract the discount, yield, and forward rate curves from coupon bond data. McCulloch used regression splines to estimate the discount function, and, more recently, Fisher, Nychka, and Zervos used smoothed splines, with the roughness penalty selected by generalized cross-validation, to estimate the forward rate curve. I propose using a smoothed spline but with a roughness penalty that can vary across maturities, to estimate the forward rate curve. This method is tested against the methods of McCulloch and Fisher, Nychka, and Zervos using monthly bond data from 1970 through 1995.

Keywords: Econometric models; Financial markets; Prices; Statistics (search for similar items in EconPapers)
Date: 1997
References: View complete reference list from CitEc
Citations: View citations in EconPapers (66)

Downloads: (external link)
https://www.atlantafed.org/-/media/documents/resea ... s/wp/1997/wp9710.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:97-10

Ordering information: This working paper can be ordered from
pubs@frbatlanta.org

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark (rob.sarwark@atl.frb.org).