2 votes

What's the difference between short rate and the bootstrapped interest rate?

I would like to make an analogy with equities. To price simple contacts like equity forwards or futures, you don't need a model, you use simple no arbitrage arguments. To price options and other more ...
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  • 816
2 votes

Interpolation of Zero rate curve

Suppose that you interpolate your zero curve, i.e. your discount factors at time $k$, $v_k$, using a log-quadratic approach: $$\ln(v_i) = \alpha + \beta D_i + \gamma D_i^2 $$ where $v_i$ is a discount ...
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  • 8,047
1 vote

Commodities forward curve

To answer your first question, an alternative approach is the Gabillion two-factor model (which was originally proposed for oil futures). At a high-level, Gabillon models the spot price as a single-...
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