The YieldCurveFitter is a rate calculator that facilitates accurate option valuation in NillaHedge's
and allows you to compare U.S. Treasury yields to instruments with maturities other than those of U.S. Treasury
bonds. For option valuation, the YieldCurveFitter extrapolates the spot rate of interest from the three and six month
treasury yields. This 'spot rate' can be considered equivalent to the risk free rate of interest, which is
used to compute Black-Scholes option values in NillaHedge.
Given a few more known rates, the YieldCurveFitter builds a model fitted to the specified rates, and predicts the unspecified yields (displayed with three fractional digits). Intermediate term values help you rationally compare yields of instruments with maturities other than those of the U.S. Treasuries.
You're not limited to predicting non-Treasury yields from U.S. Treasury bonds - all of the term yields can accept input, and any reasonable set of term yields can serve as inputs to model generation, against which other term rates are computed. To convert a term yield from input to output, just delete the existing value. The most accurate results are obtained given at least two short term rates, one medium term rate, and one long term rate.
The YieldCurveFitter writes the spot rate to the system registry each time you modify a term rate. The stored value serves as the risk free rate used to compute option values in NillaHedge. That registered risk free rate is read by NillaHedge each time it launches a tool, so you don't need to re-enter it after computing it here. The state of YieldCurveFitter is saved when you quit, and reloaded when you relaunch.
The Fetch button retrieves the current day's T-bill rates from a server on the Internet, displaying the date associated with the term rate structure. The rates most recently retrieved are cached locally so they can be re-fetched after modifying them, even without Internet access.
Refer to YieldCurveFitter User Guide for additional details.