Yield Curve Stripping

J

j88jke

Newbie
Messages
4
Likes
0
Would anybody be able to explain to me in simplest terms how to strip a yield curve completely?
The part I'm having trouble with are the futures rates. If someone knows how to do this I'd really appreciate it as it's causing me no end o problems and I'm sure some people can do this really quickly.
Below is an example yield curve I have:

O/N 0.425000
T/N 0.425000
D:23-SEP-2009*D:24-SEP-2009 0.442572
D:04-NOV-2009*D:05-NOV-2009 0.469077
Z09 99.382500
H10 99.127500
M10 98.742500
U10 98.327500
Z10 97.922500
H11 97.577500
M11 97.247500
U11 96.970000
3Y 2.028474
4Y 2.476853
5Y 2.814270
6Y 3.080493
7Y 3.291307
8Y 3.451155
9Y 3.577035
10Y 3.680220

Can someone explain what I'm meant to do and maybe do the first few to get me started?
Really appreciate it!
Jake
 
Have you not looked at the paper by Uri Ron?

The futures rates are just fwds (once they're properly converted).
 
Two things. First, when using Eurodollars you have to subtract the price from 100 to get the rate, but keep in mind thats a forward rate, not the current one. Second, Eurodollars are based on LIBOR, not Treasury yields, so they are not directly usable in the yield curve you've set up. You'd have to account for a spread.
 
I'll look at Uri Ron now. And what I need to do is to convert them. No idea where to begin.
So for example, I take Z10, 100-97.9225 = 2.0775
This rate is for the third wednesday of December 2010?
How do I account for the spread? I need to basically take that table I gave above, and get the discount factors and forward rates.
 
John, his curve is a EURIBOR curve, not treasury.

Jake:
Firstly, this looks like the 6M EURIBOR curve, which means there are several issues. Firstly, Z10 97.9225 implies an unadjusted fwd rate of 2.0775 for the 15Dec10 - 15Mar11 period. In order for you to be able to use this rate in your curve construction, you need to tweak the rate by a) convexity adjustment; b) 3s6s basis adjustment. The resulting rate (should be arnd 2.16) can then be used in a bog-standard bootstrapping procedure. I won't describe it, as Ron does a much better job than I could ever hope to.
 
Does anyone know why the front end is so strong today (bobl/schatz)?
Trying to get a flattener on here and am a bit cautious as I don't know why its steepening.
any help would be v.much appreciated!
 
You must log in or register to reply here.

Similar threads

J
Swap pricing model HELP!!!
Replies
6
Views
3K
j88jke
J
Top