Building a PieceWise Yield Curve with a Cubic Interpolation

[GL_QL]

Hi all,

I am trying to build a piecewise yield curve with QuantlibXL, using a cubic interpolation. In the last version of QuantlibXL, the cubic interp. is not implemented yet.
I thought about using an interpolation object separately. I first build a piecewise YC with, for example, a linear regression. I can extract the points corresponding to futures, swaps, depos, set a vector date and run an cubic interpolation with qlCubicInterpolation. Finally, I can set a yield curve with qlZeroCurve, which takes the previously interpolated date and yield vectors as input.

I am not satisfied with this solution. I am providing a finite number of points to qlZeroCurve, and I don't know which interpolation is used within this fonction to create the continuous curve. Can someone tell me what kind of interpolation is used, and if there is a more efficient way of using a cubic interpolation to build a piecewise yield curve ?

Thanks

[Ferdinando Ametrano-4]

On Tue, Jul 28, 2009 at 5:56 PM, GL_QL<[hidden email]> wrote:
> I am trying to build a piecewise yield curve with QuantlibXL, using a cubic
> interpolation. In the last version of QuantlibXL, the cubic interp. is not
> implemented yet.

different flowers of cubic interpolation have always been available in
QL and QLXL since day one.

> I thought about using an interpolation object separately. I first build a
> piecewise YC with, for example, a linear regression.

why a linear regression? are you fitting bond prices?

> I can extract the
> points corresponding to futures, swaps, depos,

so-called depo-futures-swap curves are usually bootstrapped, not fitted.

> set a vector date and run an
> cubic interpolation with qlCubicInterpolation.

so you're awere cubic interpolation is available

> Finally, I can set a yield
> curve with qlZeroCurve, which takes the previously interpolated date and
> yield vectors as input.
>
> I am not satisfied with this solution.

right, you don't have to be satisfied. Your approach, even if not
completely clear, appear to be quite suboptimal

> I am providing a finite number of
> points to qlZeroCurve, and I don't know which interpolation is used within
> this fonction to create the continuous curve.

you can specify the interpolation you want

> Can someone tell me what kind
> of interpolation is used, and if there is a more efficient way of using a
> cubic interpolation to build a piecewise yield curve ?

take a look at the YieldCurveBootstrapping.xls in the
StandaloneExamples folder and google around for the basic of
bootstrapping procedures.
The following paper might help:
http://quantlib.svn.sourceforge.net/viewvc/quantlib/trunk/QuantLibXL/Workbooks/Drafts/YieldCurvePaper/paper/YieldCurve-v1.0.SSRN.pdf

ciao -- Nando

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