This graph shows the continuous forward rates and zero coupon bond yields that are consistent with the constant maturity Treasury yields that were reported by the Department of the Treasury at 4 p.m. Eastern time. The forward rates and zero coupon bond yields are derived using Kamakura Risk Manager and the maximum smoothness forward rate smoothing approach developed by Adams and van Deventer (Journal of Fixed Income, 1994) and corrected in van Deventer and Imai, Financial Risk Analytics (1996). Kamakura Corporation recently announced new research by Managing Director Robert Jarrow which confirms that the maximum smoothness forward rate approach is consistent with the no arbitrage conditions on interest rate movements derived by Heath, Jarrow and Morton [1992]. There are other yield curve smoothing methods in common use which violate the no arbitrage restrictions. Among the methods which cannot meet the "no arbitrage" standard are the Svensson, Nelson-Siegel, and Merrill Lynch exponential smoothing approaches. For more information please contact Kamakura Corporation by e-mail at info@kamakuraco.com.