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#finance #has-images #yield-curve

available market data provides a matrix *A* of cash flows, each row representing a particular financial instrument and each column representing a point in time. The (*i*,*j*)-th element of the matrix represents the amount that instrument *i* will pay out on day *j*. Let the vector *F* represent today's prices of the instrument (so that the *i*-th instrument has value *F*(*i*)), then by definition of our discount factor function *P* we should have that *F* = *AP* (this is a matrix multiplication). Actually, noise in the financial markets means it is not possible to find a *P* that solves this equation exactly, and our goal becomes to find a vector *P* such that

where is as small a vector as possible

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**Yield curve - Wikipedia, the free encyclopedia**

ivate borrowing is at a premium above government borrowing, of similar maturity is a measure of risk tolerance of the lenders. For the U. S. market, a common benchmark for such a spread is given by the so-called TED spread. In either case the <span>available market data provides a matrix A of cash flows, each row representing a particular financial instrument and each column representing a point in time. The (i,j)-th element of the matrix represents the amount that instrument i will pay out on day j. Let the vector F represent today's prices of the instrument (so that the i-th instrument has value F(i)), then by definition of our discount factor function P we should have that F = AP (this is a matrix multiplication). Actually, noise in the financial markets means it is not possible to find a P that solves this equation exactly, and our goal becomes to find a vector P such that where is as small a vector as possible (where the size of a vector might be measured by taking its norm, for example). Note that even if we can solve this equation, we will only have determined P(t) for those t which have a c

ivate borrowing is at a premium above government borrowing, of similar maturity is a measure of risk tolerance of the lenders. For the U. S. market, a common benchmark for such a spread is given by the so-called TED spread. In either case the <span>available market data provides a matrix A of cash flows, each row representing a particular financial instrument and each column representing a point in time. The (i,j)-th element of the matrix represents the amount that instrument i will pay out on day j. Let the vector F represent today's prices of the instrument (so that the i-th instrument has value F(i)), then by definition of our discount factor function P we should have that F = AP (this is a matrix multiplication). Actually, noise in the financial markets means it is not possible to find a P that solves this equation exactly, and our goal becomes to find a vector P such that where is as small a vector as possible (where the size of a vector might be measured by taking its norm, for example). Note that even if we can solve this equation, we will only have determined P(t) for those t which have a c

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