Abstract
We will show that the constrained least square problem proposed in Konno and Takase [5] for estimating the forward rate sequence by using the market prices of default-free non-callable coupon bonds is in fact a convex minimization problem under more general conditions than those assumed in the subsequent paper by the same authors [6]. Consequently, the constrained least square approach can generate a smooth and accurate forward rate sequence very fast by standard convex minimization algorithms.
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KONNO, H. Convex Structure of the Constrained Least Square Problem for Estimating the Forward Rate Sequence. Asia-Pacific Financial Markets 4, 179–185 (1997). https://doi.org/10.1023/A:1009677915798
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DOI: https://doi.org/10.1023/A:1009677915798