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KIC000050 - .u-Wdu A MW m.m.y.w.s m n A an.“ ”gnaw"...

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Unformatted text preview: .u- -Wdu. A MW m..m...,._,..y.w..s.,. m , .. . n A an...“ ”gnaw". e._.m.e.....mm.w-.mmg...» . .A Piecewise Cubic for Spot Rates r(1)=rn+a,i+b,r‘+c,1’ r510 r(10)+a,(i —10)+ 12,040)” + 61(I—10)’ 10 s 2 s 20 r(20)+aa(1—20)+ 12,040)“ + c,(:—20)’ 20: r s 30 Exhibit 5-6 from Fabozzi (6“ edition) ; simissmmamf iiissiisilaznéssstérsiaéiiaai lIIGFsiiiEisiiiEEIE§§565§SEG§F‘r :sasi;E;ii:;aiiil:i§s:tsigiss Putting it all together - We want to apply some baslc filterto the set of bondswe are usingto start: — Some have all pruvlsinns (not issued anymore] — Some are extremely liquid and have a liquidity premium - Some are very nfi-thHun and have a quuldlwdiscoum ~ As with most Things, there is no clearanswer on the best way. We probably want to adjust some prices and get rid of some. ...
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