Interp Method


Key Interp Method in
Yield Curve refers to a choice from the list Interp Method
If
Modelled Qty = Discount is used, log-based interpolated methods should be preferred over non-log-based.
Otherwise, non-log-based interpolated methods should be preferred over log-based.

The following values require additional specifications that are defined in an object of type
Interpolation that is optionally supplied through the key Interpolator
Cubic
Log Cubic
Mxd Lin Cubic
Log Mxd Lin Cubic
Comp Cubic
Convex Mono
Comp Linear
If the value here is
Cubic or Log Cubic and the Interpolation is not supplied, the assumed default Interpolation object is such that the value is equivalent to Nat Cubic or Nat Log Cubic respectively.
Testing shows that
Nat Cubic (or its log equivalent) is generally a good choice that leads to smooth forward curves, but it may lead to bootstrapping failure in certain cases.
A more stable choice with slightly less smooth results is the
Kruger Cubic (or its log equivalent).
The
Lagrange Cubic (or its log equivalent) is very smooth and stable but it has the drawback that its bootstrapping is more time consuming.