Comparing Numerical Methods for Term Structure Fitting

Student: Lukianov Andrei

Supervisor: Victor A Lapshin

Educational Programme: Economics (Bachelor)

Final Grade: 7

Year of Graduation: 2019

The estimation of the term structure of interest rates is an important problem in finance. A popular solution to this task is to choose some parametric functional form of the yield curve and find optimal parameters that best fit current debt market data. It appears that a different choice of optimization methods and their initial condition can lead to significant difference in the results obtained from the solution of such an optimization problem. The goal of this paper is to research how gradient, direct search and global optimization methods with different parameters and initial conditions lead to different results in the optimization of sum of squares of bonds prices and other kind of functional with the use of Nelson-Siegel-Svensson parametric yield curve form on the Russian OFZ market.

Full text (added May 10, 2019)

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