Skip to content

How to calculate spot rate using bootstrapping?

December 24, 2015

P = C / (1 + Z1) + (C + PAR)/(1 + Z2)^2

P = bond price (often PAR)

C = Coupon using YTM or Par Rate

PAR = Par value of bond (usually 100)

Z1 = Period 1 spot rate = Period 1 YTM

Z2 = Period 2 spot rate which must be solved for using algebra.

Advertisements

From → Asset Valuation

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: