Central Banks and Yield Curves
The U.S. Treasury employs a “Quasi Cubic Hermite Spline function”, a calculation the Treasury doesn't make public. Yet the St Louis Federal Reserve provides a few clear examples. Because the Treasury releases daily yield rates, many hedge funds, bank research departments, and trading firms approximate almost an exact Treasury Yield Curve.
The Japanese employ a type of Gaussian Affine rate-term structure for their yield curve's predictive powers. From mathematics, Carl Friedrich Gauss gave the world in 1809 the normal distribution with a probability function—the Gaussian approach to mathematics called standard deviation. The difference between the Japanese and other central banks and market professionals is the Japanese ...
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