I am trying to understand bond-valuation and construction of yield curve. I don't have any exposure to bootstrapping or what-so-ever as of now. So it's appreciated to have an example but not too technical (not too advanced mathematical terms - but straight forward).
I have seen online that some uses interpolation (non-/linear) to construct the full yield curve with tenors. And for lending and borrowing, most institutions take yield curve as the benchmark.
- Why is the curve constructed using cash, future and swap rates?
- What are these future rates? Bond futures or interst rate futures?
- Cash rates plotted in the curve are directly used for lending/borrowing within institutions. What about the the futures rates and swap rates in the yield curve? Are these taken as it is or just as a reference to derive "in-house" rates?
- Are there risks lenders/borrowers facing by taking rates plotted in the yield curve as it is?
- Are there functions availabile in C# to interpolate and build full yield curve using USD-daily tresury yield curve?