O'Reilly logo

Key Financial Market Concepts, 2nd Edition by Bob Steiner

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Zero-coupon Yield, the Spot Yield Curve and Bootstrapping

Definition

A zero-coupon yield is the actual or theoretical yield earned on an instrument where there are no cashflows other than at the start and at maturity.

The spot yield curve shows zero-coupon yields against time to maturity.

Bootstrapping is a process of building up a theoretical spot yield curve by calculating zero-coupon yields for successively longer maturities from those for shorter maturities.

How are they used?

Zero-coupon bond

A zero-coupon instrument is one which pays no coupon. For example, a company might issue a 5-year bond with a face value of 100 but no coupon. Clearly an investor would not pay 100 for this; he would pay considerably less to allow for the fact that ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required