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Sep 8

Bootstrapping interest rate curve

Posted by abiao at 15:49 | Code » VBA/Excel | Comments(6) | Reads(71347)
Bootstrapping is a technique for building a zero-coupon yield curve from the prices of a set of coupon bonds through forward replacement.

Using these zero-coupon bonds we can deduce forward and spot rates for all time to maturities by making a couple of assumptions (including linear interpolation). The term structure of spot rates is recovered from the bond yields by solving for them recursively, this iterative process is called the BootStrap Method.

http://janroman.dhis.org/stud/Bootstrap_2006.xls shows how to implement Boostrapping method in Excel, more can be found at his website http://janroman.dhis.org/index_eng2.html.

Link appears broken
the site is back alive.
this may be a good looking spreadsheet but it is wrong. zero rate should be higher than the standard yield curve rates
"zero rate should be higher than the standard yield curve rates", may I know why?
Pretty cool and precise, everything is in the perfect spot.
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