Bootstrapping involves
A) Calculating the yield on a bond
B) Working from short maturity instruments to longer maturity instruments determining zero rates at each step
C) Working from long maturity instruments to shorter maturity instruments determining zero rates at each step
D) The calculation of par yields

Question

Quizplus · Accepted Answer

Bootstrapping is a way of constructing the zero coupon yield curve from coupon-bearing bonds.It involves working from the shortest maturity bond to progressively longer maturity bonds making sure that the calculated zero coupon yield curve is consistent with the market prices of the instruments.

Bootstrapping Involves