ABSTRACT
This chapter implements a simple bootstrapper than can be used to construct a yield curve from a series of swap rates. The yield curve, also known as the term structure of interest rates, is the curve that shows the relation between the interest rate and the time to maturity. Interest rate products in the market have only a few different maturities. In order to construct a yield curve, we need to know the interest rates at all tenors within a time horizon. Bootstrapping a yield curve allows us to produce swap prices that are consistent with market prices. The chapter introduces how to construct a yield curve by bootstrapping discount factors from swap rates, which cover a wide range of maturities. It also introduces an interpolation method and Newton's method for solving a nonlinear equation that is required in the bootstrapping process. The readers get more information about interpolation methods for constructing yield curves.
