Abstract

The ordinary bootstrap method for computing forward rates from zero rates generates posynomial equations as introduced in an area of optimization termed geometric programming invented by Duffin, Peterson, and Zener [6]. posynomial disc. fns e−zk(tk−t0) �k−1 = i=0 x (ti+1−ti) i,i+1, k = 1,... express the forward rates zk(tk − t0) = � k−1 i=0 fi,i+1(ti+1 − ti), where xi,i+1 = e −fi,i+1 in Tables 2–4. Note that the are n equations in m unknowns (n = m =5). Ordinary bootstrapping does not work when n � = m, eg., if there were no 0.5 time T–Bill. 1 (1)

Citations