A Major Advantage of the Cubic Spline Approach Is That

question 15

Multiple Choice

A major advantage of the cubic spline approach is that it can be estimated using ordinary least squares (OLS) regression.Which of the following is NOT related to this estimation feature?

• A)OLS may be used because the price of bonds is the just the product of cashflows and discount functions summed up over all cash flows.
• B)OLS enables the use of all the bonds in the data set,even though there are more bonds than parameters to be estimated.
• C)OLS works for polynomials of any order in the splining function.
• D)OLS may be used because it satisfies the smoothness condition required for the forward curve in the estimation.

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