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 . We provide a full theoretical framework as well as practical applications for both single-curve and multi-curve estimation .
We present a non-parametric method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse . The discount curve reproduces the market quotes perfectly, has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations . We provide a full theoretical framework as well as several practical applications .
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introduce a novel
present a non-parametric
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such that 1)
. The discount curve reproduces
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are exactly replicated, 2) the curve
perfectly,
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3) no ad hoc interpolation is needed, and 4) no numerical root-finding algorithms are required
and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations
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practical applications for both single-curve and multi-curve estimation
several practical applications