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@Arrigo's answers are quite good; I'll try to beef up his points a bit more. Yield curves should be constructed using instruments of similar credit risks. If you're building a US Treasury yield curve, then you should use Treasury bills, notes, and bonds (although lots of people actually exclude Treasury bills because of market segmentation concerns). On ...


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I'll try to give you an answer. I think the term structure is built from those financial products because they are the most liquid for those maturities: theoretically, a liquid instrument has a price coming from a large consensus which you can think of the market. This is an "academical" reason, probably there are other reasons also (I'm still learning). ...


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It is not normal, for swaptions, your prices should be perfect or you open yourself up to arbitrage. Is Bloomberg calculating the swaptions with dual-curve stripping/bootstrapping? SWDF DFLT has a setting for that. If you are assuming in your model that your discount curve is the same as your forward rates curve, but Bloomberg is doing proper post-2006 OIS ...


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Garabedian, Typically, the "swap curve" refers to an x-y chart of par swap rates plotted against their time to maturity. This is typically called the "par swap curve." Your second question, "how it relates to the zero curve," is very complex in the post-crisis world. I think it's helpful to start the discussion with a government bond yield curve to ...


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wiki about yield curve: ... the yield curve is a curve showing several yields or interest rates across different contract lengths (2 month, 2 year, 20 year, etc...). The curve shows the relation between the interest rate (or cost of borrowing) and the time to maturity. For example, the U.S. dollar interest rates paid on U.S. Treasury securities for ...



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