Mr. Crab's Bootstrap
19 Pages Posted: 7 Oct 2012 Last revised: 16 Sep 2014
Date Written: February 19, 2014
Abstract
Observe crabs in the sand of our beaches: they move forward, backward and then forward again. Before the crisis standard bootstrap of the interest rate curve was a "Forward" looking iterative process where, in order to find discounts at certain dates, only information at previous dates was used.
In this article we describe a new bootstrapping technique that involves also some "Backward" steps, moving like a crab: this new methodology considers coherently the dual-curve framework described in the work of Henrard (2010).
Keywords: Bootstrap, Dual curve, FRA, STIR Future, Swap
JEL Classification: G13
Suggested Citation: Suggested Citation
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