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Swap Curve

Swap rates are incorporated into the integrated zero curve using a basic bootstrapping technique (linear par). The number of output rates extracted from the swap curve is dependent on the frequency parameter supplied with the input curve: for example, if that parameter is "Semi-Annual", then the output curve will include a rate that coincides with the semi-annual payment dates of the underlying swaps. The output rates will continue out to the maturity date of the longest-dated input swap rate.


The basic steps involved in constructing the output rates from the swap curve are as follows:







Based on the input parameters associated with the swap curve, determine the vector of dates for which an output zero rate and discount factor will be generated.



Interpolate an input swap rate for each of those dates that do not coincide with an input swap rate. This is based on linear interpolation.



Use the bootstrapping technique to generate the discount factor that is appropriate for each of the output dates.



Convert the discount factor for each output point into an equivalent zero rate (with Actual/365 basis).





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