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Unformatted text preview: A popular model is the Nelson-Siegel family with forward rate r ( t ; 1 , 2 , 3 , 4 ) = 1 + ( 2 + 3 t )exp(- 4 t ) Fit this forward rate to the prices by nonlinear regression using R s optim function. (a) What are your estimates of 1 , 2 , 3 , and 4 ? (b) Plot the estimated forward rate and estimated yield curve on the same gure. Include the gure with your homework. 1...
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This note was uploaded on 09/20/2011 for the course ORIE 4630 at Cornell University (Engineering School).