volume 7, issue 3, P467-507 2001
DOI: 10.1017/s1357321700002439
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A.J.G. Cairns, D.J. Pritchard

Abstract: ABSTRACTThis paper discusses the use of parametric models for description of the term structure of interest rates and their uses. We extend earlier work of Cairns (1998), Chaplin (1998) and Feldman et al. (1998), by presenting new theoretical results and also by demonstrating that the same model can be applied to countries other than the United Kingdom. First, we prove that the process of fitting a yield curve to price data has a unique optimal solution in both zero-coupon-bond and low-coupon-bond markets. Fur…

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