Construction of Zero-Coupon Yield Curve From Coupon Bond Yield Using Australian Data
|Author(s):||Ram Bhar & Carl Chiarella|
|Date of publication:||November 1996|
|Working paper number:||70|
This paper briefly surveys the various approaches to modelling the zero coupon yield curve is the starting point for much finance research. The method adopted here for the Australian Treasury bond data is based upon polynomial spline fitting, but with the constraint that the long end of the term structure is stable. This approach has also been successfully applied to the Danish bond market (Tanggaard and Jakobsen (1988)). The forward rate curve then becomes the important input data for the modelling of the term structure of interest rates and pricing of interest rate contingent claims using the Heath-Jarrow-Morton (1992) model.
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|Known citations:||Sahut, J. and Mili, M., 2006, "Sensitivity of Interest Rate Caps to the Elasticity of Forward Rate Volatility", International Journal of Business, 11(2), 107-119.|