Posted by
Ferdinando M. Ametrano-3 on
Apr 12, 2011; 7:47am
URL: http://quantlib.414.s1.nabble.com/Perpetual-Bond-tp8497p8499.html
On Fri, Apr 8, 2011 at 5:29 PM, Luigi Ballabio <
[hidden email]> wrote:
> As for extrapolation, the term structure just keeps going after the
> maximum date with the same formula it was using before it. If, say, the
> forward rate was piecewise constant, it will be constant afterwards. If
> you were using a linear interpolation or a spline, it will keep doing
> that (which will eventually lead you to have rates too high, or in the
> negative.)
I respectfully disagree: yield term structures always extrapolate
using constant instantaneous forward rate, not using the specified
interpolation algorithm
ciao -- Nando
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