Groundlearn / Glossary / Bootstrapping (yield curve)
Bootstrapping (yield curve)
A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
Deriving spot rates sequentially from the prices of coupon bonds, using each solved rate to strip the next.
The exam angle
A different operation from the statistical bootstrap, which resamples data. Same word, unrelated technique.
Where it appears in the syllabus
- Fixed IncomeCFA Level II · exam weight 10–15% · Term structure dynamics, arbitrage-free valuation, embedded options, CDS.
- Valuation & Risk ModelsFRM Part I · exam weight 30% · VaR and ES, option valuation, bond risk, stress testing, credit and op risk.
Related terms
- ConvexityThe curvature of the price–yield relationship — how duration itself changes as yields move.
- DurationThe sensitivity of a bond’s price to a change in yield, and equivalently the weighted average time to receiving its…
- DV01The change in a position’s value for a one basis point change in yield, expressed in currency.
- Forward rateThe interest rate agreed today for borrowing or lending over a future period, implied by today’s spot curve.
- Option-adjusted spreadThe spread over the benchmark curve once the value of any embedded option has been stripped out, making bonds with and…
- Spot rateThe yield on a single cash flow received at one future date, with no intervening coupons.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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