Theoretical spot rates, Financial Management

The theoretical spot rates for treasury securities represent the appropriate set of interest rates that should be used to value the risk from default-free cash flows. A treasury yield curve can be used to construct the default free theoretical spot rate curve. Default-free theoretical spot rate curve can be built with the help of observed Treasury yield curve.

Though a number of approaches are in practice, but one prominent approach is bootstrapping.

Posted Date: 9/10/2012 2:14:53 AM | Location : United States

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