Convex Structure of the Constrained Least Square Problem for Estimating the Forward Rate Sequence |
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| Authors: | HIROSHI KONNO |
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| Affiliation: | (1) Graduate School of Decision Science &, Tokyo Institute of Technology, Technology 2-12-1, O-okayama, Meguroku, Tokyo, 152, Japan |
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| Abstract: | We will show that the constrained least square problem proposed inKonno and Takase [5] for estimating the forward rate sequence by usingthe market prices of default-free non-callable coupon bonds is in facta convex minimization problem under more general conditions than thoseassumed in the subsequent paper by the same authors [6]. Consequently,the constrained least square approach can generate a smooth andaccurate forward rate sequence very fast by standard convexminimization algorithms. |
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| Keywords: | convex minimization problems forward rate sequence least square approach term structure of interest rates. |
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