Chapter 5. Estimating the Term Structure of Interest Rates
In the previous chapter we discussed how changes in the level of interest rates, the term structure, affect the prices of fixed income securities. Now we focus on the estimation of the term structure of interest rates, which is a fundamental concept in finance. It is an important input in almost all financial decisions. This chapter will introduce term structure estimation methods by cubic spline regression, and it will demonstrate how one can estimate the term structure of interest rates using the termstrc package and the govbonds dataset.
