3. (Cubic Spline Overshoots, Part II)

In Chapter 13 we gave a detailed introduction to cubic splines and some of their applications.

In particular, Exercise 5 in Chapter 13 was concerned with a discussion on using cubic splines and possible overshoots than can occur with yield curve data. Answer the following questions:

a) Use the same data as in Exercise 5, Chapter 13 and display the interpolated cubic spline values in Excel.

b) Compare the results with those produced by linear interpolation (see equation (13.32)).

c) Display the first and second derivatives of the cubic spline from part

a) based on the formulae (13.38) and (13.37), respectively.