Zero Curve Bootstrapping

The term structure of an interest rate basis curve is defined as the relationship between the basis zero rate and it’s
maturity. Basis curves are used as the forecast curves for pricing interest rate products. The increase in basis spreads has
resulted in large impacts on non standard instruments.

The basis curve construction methodology is based on the most liquid market instruments. Normally a basis curve is
divided into two parts. The short end of the term structure is determined using LIBOR rates and the remaining is derived
using basis swaps.