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Suppose we observe the following term structure (of annualised spot rates):

  • 0-3 Months $\rightarrow$ 4.0%.
  • 0-6 Months $\rightarrow$ 4.2%.
  • 0-9 Months $\rightarrow$ 4.4%.

Question1) How can we infer (compute) the rates for the period 0-2M and 0-4M. Is there any standard way (interpolation) to do that in the context of no-arbitrage? Any reference?

Thanks!

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there are several types of yield curve models, have a read at https://link.springer.com/chapter/10.1057/9780230513747_3

you might also have a look at https://en.wikipedia.org/wiki/Affine_term_structure_model

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