Constructing the theoretical spot rate curve for treasuries, Financial Management

The following treasury issues can be included for the construction of the curve:

  • On-the-run treasury issues.

  • On-the-run treasury issues and selected off-the-run treasury issues.

  • All treasury coupon securities and bills.

  • Treasury coupon strips.

After the selection of securities for construction of the theoretical spot rate curve, it is necessary to select the methodology for constructing the curve. The security included decides the methodology for constructing the curve. When on-the-run treasury issues with or without selected off-the-run treasury issues are used, bootstrapping methodology is used for constructing the curve. Whereas, if all the treasury coupon securities and bills are used then an elaborate statistical technique is used.

Posted Date: 9/10/2012 3:30:02 AM | Location : United States







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