Mr. Crab's Bootstrap

19 Pages Posted: 7 Oct 2012 Last revised: 16 Sep 2014

See all articles by Roberto Baviera

Roberto Baviera

Polytechnic University of Milan - Department of Mathematics

Alessandro Cassaro

Goldman Sachs International

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

Baviera, Roberto and Cassaro, Alessandro, Mr. Crab's Bootstrap (February 19, 2014). Available at SSRN: https://ssrn.com/abstract=2158131 or http://dx.doi.org/10.2139/ssrn.2158131

Roberto Baviera (Contact Author)

Polytechnic University of Milan - Department of Mathematics ( email )

P.zza L. da Vinci, 32
Milan, 20133
Italy

Alessandro Cassaro

Goldman Sachs International ( email )

United Kingdom