Convex Structure of the Constrained Least Square Problem for Estimating the Forward Rate Sequence

We will show that the constrained least square problem proposed in Konno and Takase [5] for estimating the forward rate sequence by using the market prices of default-free non-callable coupon bonds is in fact a convex minimization problem under more general conditions than those assumed in the subsequent paper by the same authors [6]. Consequently, the constrained least square approach can generate a smooth and accurate forward rate sequence very fast by standard convex minimization algorithms. Copyright Kluwer Academic Publishers 1997