Re: dual bootstrap question

Posted by Peter Caspers-4 on
URL: http://quantlib.414.s1.nabble.com/dual-bootstrap-question-tp14144p14163.html

maybe related: I like the option in Murex to calibrate spread curves over other curves, the spread being expressed in zero rate, instantaneous forward rate (additive) or discount factor (multiplicative) space, and the tenor structure (and interpolation) being independent of the underlying curve. I guess with that one could also easily obtain the non crossing thing below as a byproduct through suitable constraints on the spread during curve calibration.

However concerning the crossings I bet there are abnormal but valid market conditions under which opposite basis spreads are observed. I never saw it myself, but browsing through wilmott gives some hints there were such situations in some currencies in the past.

Another interesting new development in Murex are so called forward curves which directly interpolate in discrete forwards - since you need one curve per tenor anyway, why not model the market forwards in question directly, giving good control over the quantities you are ultimately interested in. I think I will try an ql implementation of that last point in the near future.

Peter

Am 21.03.2013 18:45, schrieb Ferdinando Ametrano:

the best way of ensuring no crossing curves would be to bootstrap a base (OIS) curve, and have all the others expressed as (tenor-increasing positive) basis.

I have strong ideas on how this should implemented, but no time to work on it :-(

Should I kick-start a project? ;-)

On Thu, Mar 21, 2013 at 5:43 PM, MN <[hidden email]> wrote:

I agree with you. Nevertheless, it would be useful to have some assurance for non crossing tenors independent of the selected interpolation model.

 

 

From: Ferdinando Ametrano [mailto:[hidden email]]
Sent: Thursday, March 21, 2013 4:40 PM
To: MN
Cc: QuantLib Mailing Lists
Subject: Re: [Quantlib-users] dual bootstrap question

 

On Thu, Mar 21, 2013 at 4:17 PM, MN <[hidden email]> wrote:

Ok, however, in my experience it may happen for some interpolation models where oscillation can cause problems in the long end.

 

which is a loud and clear warning IMO about the need to switch to a reliable interpolation method, i.e. monotonic interpolation

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