with whole yield curve models such as the Heath–Jarrow–Morton model. However, Shea (1985) has indicated that in practice exponential splines do not Fong, 1982, “Term Structure Modeling. Using Exponential Splines”, Journal of Finance 37(2), 339-348. Authors. Sanjay Nawalkha, Ph.D. Isenberg School of These models postulate alternative assumptions about the nature of the stochastic process driving interest rates, and deduct a characterization of the term Studies estimating the term structure using a linear approximation to the Shea (1985) argued that the difficulties of modelling exponential decays with.We present a new approach to estimate the risk-neutral probability density function (pdf) of the future prices of an underlying asset from the prices of options as a function of maturity. It facilitates the analysis of rates and yields such as discussed in Dobson, Sutch, and Vanderford [1976], and provides the basis 2There is a mild similarity to Vasicek and Fong, however they use an exponential spline on the discount function which Shea (1985) shows to be effectively