[R-sig-finance] swap to forward rates

Thomas Steiner finbref.2006 at gmail.com
Wed Feb 22 19:08:57 CET 2006

Dear David,
thanks for you answer.

> There are many algorithms for constructing a yield curve from market
> data.
> They all give different answers, some wildly.

But why?
Describing the term structure of interest rates by forward rates is
mathematically equivalent (no market model assumed, just no arbitrage)
to tell the swap rates. So there should be an exact way in principle,

> I don't see how you can get the first fwd rate without at least one
> cash.

I mentioned this at the end of my message: I will add this later,
right now I assume that the first point in the swap curve is a cash

> You will also get quite different results by not taking market
> conventions into account.

Thanks, I didn't know that - I thought that results should be at about
the same (not 60bps difference).

> This is one big reason why people are willing
> to spend serious money for yield curve sotware.

I am working at university and I try to find the cheapest way possible...

Can you give any of your results with my rates, just to compare?
Any other comments, hints?

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