Re: Smooth Forward Curve from Market Rates

Posted by MikeD on Sep 16, 2010; 5:25pm
URL: http://quantlib.414.s1.nabble.com/Smooth-Forward-Curve-from-Market-Rates-tp640p641.html

Switch your interpolation to "MonotonicLogCubicNaturalSpline" on Discount Factors, that will smooth out your curve.

The actual 3m forward rates out in the super-long end of the curve are not under 3%.  3m forward Libor rates around the 37 year point are roughly 3.55%, so wherever you are referencing, your data is incorrect.

-Mike

On Wed, Sep 15, 2010 at 8:45 AM, newbie730 <[hidden email]> wrote:

http://old.nabble.com/file/p29718645/USD%2B9-15-2010.png
http://old.nabble.com/file/p29718645/smooth-usd.png
I have attached a screenshot of the 3 month forwards implied by current
market quotes using the Piecewise Bootstrapped Term Structure - the
resulting curve, as you can see, is not smooth at all. Is it possible to get
the market implied forwards with a smooth interpolation?

Note the smooth-usd.png file - is something like this possible using
QuantLib and actual market rates?

Further - notice the tail end of the two curves, the QL term structure is
implying forwards of > 3.5% past the 40 year point where the actual market
forwards are just under 3%. This is clearly inaccurate if one were to trade
a long-dated forward swap.
--
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