Showing papers in "Journal of Business Finance & Accounting in 1991"

Estimating the gilt-edged term structure: basis splines and confidence intervals

Abstract: The term structure of interest rates defines the array of discount factors on a collection of default-free pure discount (zero-coupon) bonds that differ only in their time to maturity. There are a number of reasons why we might wish to observe these rates, for example, to value other certain cash flow streams, or to test the theories of the stochastic evolution of the term structure (e.g. Ho and Lee, 1986). As with many other countries, most bonds in the UK, other than the very short maturity Treasury Bills, pay coupons, and so such rates are not directly observable. Consequently, studies to estimate the term structure have used various methods of fitting the following standard discounting equation to bond prices and cash flows