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| Author: | Steely, J. M. |
| Title: | Estimating the gilt-edged term structure: basis splines and confidence internals |
| Journal: | Journal of Business Finance and Accounting
1991 : JUN, VOL. 18:4, p. 513-529 |
| Index terms: | GILT-EDGED SECURITIES TERM STRUCTURE OF INTEREST RATES ESTIMATION UNITED KINGDOM GOVERNMENT |
| Language: | eng |
| Abstract: | Studies estimating the term structure using a linear approximation to the discount function frequently use spline functions. Many of these functions can be shown to generate a regressors' matrix which is merely perfectly collinear. A form of spline function, "B-splines" is presented, which eliminates this problem. Comprehensive details of the form of B-splines and the estimation processes involved are given in order to establish a definitive procedure for this form of term structure estimation. Associated procedures are used to estimate the term structure for British Government securities. Simple, yet robust, formulae are derived and used to demonstrate the strength of the B-spline methodology. |
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