Interest rates 3: Bootstrapping the interest-rate term structure

  • Market quotes of deposit rates, IR futures, and swaps
  • Need for a consistent interest-rate curve
  • Instantaneous forward rate
  • Interest-rate term structure built using multiple rates
  • Bootstrapping quoted deposit, futures, and swap rates
  • Foreign-exchange forward contract
  • Sensitivities of interest-rate portfolios (DV01)
  • Hedging portfolio interest-rate risk

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