Before revision: We introduce a novel method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse such that 1) the market quotes are exactly replicated, 2) the curve has maximal smoothness, 3) no ad hoc interpolation is needed, and 4) no numerical root-finding algorithms are required .
After revision: We introduce a novel method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse such that 1) the market quotes are exactly replicated, 2) the curve has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations .