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FRM Tutorial: Boot Strap Method to Calculate Spot Rate Curve

March 31, 2010
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Boot Strap method is used to calculate the spot rate curve, when the prices of the bonds of different maturity and the coupon payment associated with the bond is available. There is an excel sheet attached which describes the process of calculating 4 spot rates when prices of 4 bonds of different maturity are available.

#FRM Boot Strap Method

In the bootstrapping technique one repetitively applies a no-arbitrage implied forward rate equation to yields on the estimated Treasury par yield curve.

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