Approximating term structure of interest rates using cubic L1 splines

Nan Chieh Chiu, Shu Cherng Fang, John E. Lavery, Jen Yen Lin, Yong Wang

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


Classical spline fitting methods for estimating the term structure of interest rates have been criticized for generating highly fluctuating fitting curves for bond price and discount function. In addition, the performance of these methods usually relies heavily on parameter tuning involving human judgement. To overcome these drawbacks, a recently developed cubic L1 spline model is proposed for term structure analysis. Cubic L1 splines preserve the shape of the data, exhibit no extraneous oscillation and have small fitting errors. Cubic L1 splines are tested using a set of real financial data and compared with the widely used B-splines.

Original languageEnglish
Pages (from-to)990-1004
Number of pages15
JournalEuropean Journal of Operational Research
Issue number3
Publication statusPublished - 2008 Feb 1

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management


Dive into the research topics of 'Approximating term structure of interest rates using cubic L1 splines'. Together they form a unique fingerprint.

Cite this