# Tag Info

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It could be much more simple: if you use the method of moments (MM) then you estimate the mean and the variance and for example the kurtosis of your sample. Then you fit the parameters to these statistics. Alternatively you use maximum-likelihood (MLE). For MM: from wikipedia you get the mean and the variance. In your notation you can fit $b = \bar{r}$ so \$...

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Why do you think this is not apropriate? Matlabs documentation for 1-D Data interpolation states that interpl1 using method spline is the right way to go: Spline interpolation using not-a-knot end conditions. The interpolated value at a query point is based on a cubic interpolation of the values at neighboring grid points in each respective dimension. ...

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I think the following two questions and related answers should help in answering the question: Why use swap-rates in a yield curve? and Is there an Australian Interbank Rate? Essentially to derive funding curves you gotta use what is left with the constraint that the source instrument has to be liquid enough and closely enough reflect true market ...

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It really depends on how/where do you plan to use final values. I would not use extrapolation since it will ignore market realities. Forward rates across long end tend to be increasing while dumb extrapolation might give you the opposite result. In case of treasuries one can use treasury and swap spread and while you do not have 50 Y treasuyy one can find ...

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It depends on the market you're interested in and what the curve is used for. To build the USD swap curve, for example, you've got a ton of information available from actively traded market instruments – fed funds futures (monthly), OIS (even finer details at the front end), Eurodollar futures (quarterly), basis swap, etc. All of these should be ...

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As an additional (simple) solution I would use the probability integral transform (PIT) of the returns with respect to the generalized pareto distribution. Under the null hypothesis that the distribution is correctly specified, outcomes of the PIT should be independent uniform U[0; 1] random variables. Then you can use traditional independence tests.

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I don't know if there are any additional issues that arise with using goodness off fit with a piece-wise function. When I have fit generalized pareto distributions to series like financial market returns, I have noticed that it is common to differences between the estimated distribution and observed returns at the cutoff points. This is going to be the main ...

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For the US Treasury market, zero coupon bonds are traded and they are called STRIPS. You can access them through "S GOVT" (coupon Strips) or "SP GOVT" (principal strips) on BBG. With regard to relative value trading, it's actually pretty rare that we fit models to zeros, because a lot of them are not liquid and trade differently from their coupon ...

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For RV purposes, I have actually continued to use libor discounting for simplicity; otherwise, you'd have to model multiple curves, which become very difficult to work with... That being said, the curve has been trading very differently after the crises. For example, 5y typically didn't deviate that much from 2y and 10y on relative value basis historically, ...

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