Calibrate a yield curve using the market inputs given in Figure 2-3.
1. Bootstrap the discount factors for all the calibration points in Figure 2-3.
2. Produce discount factors at the following non calibration times given in Figure 2-4.
3. Reproduce the 3Y swap rate calibration point using your discount factors.
4. Produce a continuously compounded yield curve using (2.4)-i.e., a graph of ri versus t i.
Make the following assumptions:
- Dates overlap perfectly-i.e., the 3M cash rate ends just when the first futures begins.
- The day count basis for all rates is 30/360-i.e., 3M = 0.25 Years.
- All times are relative-i.e., the actual dates such as "Jan 1, 2012" don't matter and may be ignored. This relaxed assumption is true only for this exercise. In practice, actual dates, holiday calendars, etc. need to be taken into account.