Cubic Spline with Bootstrap

Overview


the simplest way to fit a rate curve with cubic spline is to simply select a set of knot points with known rates and to then fit the Cubic Spline to those points. The knot points are usually chosen from a set of common maturities. For example 1 year, 2year, 5 year, 10 year, 30 year. The rates at each of these points is then calculated, typically by using the Bootstrap method.

Sample


The following implements the cubic spline on the following bootstrap rates.

  • {% f(0) = 3 %}
  • {% f(1) = 3.2 %}
  • {% f(2) = 4 %}
  • {% f(3) = 5 %}
  • {% f(4) = 5.5 %}
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