Interpolation in PieceWiseFlatForward

[K.LAMINE-2]

Hi all,

I was wondering what kind of interpolation method is used by a PieceWise FlatForward termstructure to return interpolated rates for maturities which are not part of.0  the initialisation set.
For instance, suppose that I create a curve with the following data (inside RateHelper objects) :
03M : 3.90%
06M : 4.20%
09M : 4.40%
01Y : 4.80%
When I want to know the interpolated rate for 7M or 8M maturities either by using Xibor indexes or  the discount() function, I get values that I can't replicate when I use Linear, LogLinear, or NaturalCubicSpline interpolations.
What the termstructure gives me is :

07M : 4,28784
08M : 4.34766

Am I missing something or what ??

Thanks,

Karim LAMINE

[Luigi Ballabio]

On 06/14/2005 04:57:08 PM, [hidden email] wrote:
>
> I was wondering what kind of interpolation method is used by a
> PieceWiseFlatForward termstructure to return interpolated rates for  
> maturities which are not part of.0  the initialisation set.

It's a log-linear interpolation on the implied discount factors. I  
don't think it translates into any simple expression for the spot Libor  
rates.

Interpolating directly over the latter is not implemented at this time,  
but could be done in a relatively easy way by defining a class (similar  
e.g. to InterpolatedZeroCurve) which calculates discount factors from  
such rates and by passing the new class as a template parameter to  
PiecewiseYieldCurve. Follow up for more details if you're interested in  
implementing it.

Later,
        Luigi

----------------------------------------

Innovation is hard to schedule.
-- Dan Fylstra

[K.LAMINE-2]

Thanks a lot Luigi,

Now I am finding the right results.
I am actually trying to replicate the results of  fixing(), so I don't need to implement a way of interpolating the Libor rates. However, I am willing to do this as a contribution as soon as I have completed my current work, should this be of any interest.

Later,

Karim

Luigi Ballabio <[hidden email]> Envoyé par : [hidden email] 14/06/2005 18:20

Pour :        [hidden email]         cc :        [hidden email]         Objet :        Re: [Quantlib-users] Interpolation in PieceWiseFlatForward

On 06/14/2005 04:57:08 PM, [hidden email] wrote:
>
> I was wondering what kind of interpolation method is used by a
> PieceWiseFlatForward termstructure to return interpolated rates for  
> maturities which are not part of.0  the initialisation set.

It's a log-linear interpolation on the implied discount factors. I  
don't think it translates into any simple expression for the spot Libor  
rates.

Interpolating directly over the latter is not implemented at this time,  
but could be done in a relatively easy way by defining a class (similar  
e.g. to InterpolatedZeroCurve) which calculates discount factors from  
such rates and by passing the new class as a template parameter to  
PiecewiseYieldCurve. Follow up for more details if you're interested in  
implementing it.

Later,
                Luigi

----------------------------------------

Innovation is hard to schedule.
-- Dan Fylstra



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