Estimation of the term structure by linear regression

Suppose that the discount function can be expressed as the linear combination of the Estimation of the term structure by linear regression functions that are twice continuously differentiable functions as

Estimation of the term structure by linear regression

where

Estimation of the term structure by linear regression

We can estimate the weights Estimation of the term structure by linear regression by generalized least squares. We will discuss the choice of the functions later. The estimated discount function ...

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