When perturbing a key rate in order to assess sensitivity of portfolio value, what sort of interpolation is standard? A book I am looking at says linear, but this seems pretty unrealistic to me--and of real significance for longer durated portfolios or shorter term perturbations. Anyone familiar with literature on the matter? Thanks.
If I have understand right what you are looking for, I think that Nelson–Siegel Model can halp you, google it.
Hear some readng: Nelson-Siegel model