Term structures with converging forward rates

The risk-free term structure of interest rates is used by financial institutions to determine how much money needs to be invested today to receive a given amount of money on a later date. Michel Vellekoop and Jan de Kort (both UvA) have investigated inter- and extrapolation techniques that can be used to create discount curves from observed market data under different assumptions on asymptotic forward rates. They discuss the methods proposed by EIOPA and the Commission UFR and suggest some new alternatives.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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