Which of the following is NOT a benefit of the spline method of estimating discount functions across a spectrum of maturities?
A) Splines allow fitting curves flexibly to a high degree of fit.
B) Splined curves are continuous.
C) Spot and forward rates obtained from splined curves are always smooth.
D) Splined curves allow fitting linear functions of maturity between knot points.

Question

Quizplus · Accepted Answer

Splined curves do not always guarantee smooth spot and forward rates, as the smoothness depends on the choice of spline and the placement of knot points.

Which of the Following Is NOT a Benefit of the Spline