We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of no-arbitrage, the admissible discount curves take the form of polynomial, exponential functions. We introduce reproducing kernels that are admissible under no-arbitrage as a tractable regression basis for the estimation problem in calibrating the model to market data. We provide a thorough numerical analysis using real-world treasury data.
@article{arxiv.2506.03342,
title = {Reproducing kernel Hilbert space methods for modelling the discount curve},
author = {Andreas Celary and Paul Krühner and Zehra Eksi},
journal= {arXiv preprint arXiv:2506.03342},
year = {2025}
}