@article {Rendleman80, author = {Richard J.. Rendleman, Jr}, title = {Interpolating the Term Structure from Par Yield and Swap Curves}, volume = {13}, number = {4}, pages = {80--89}, year = {2004}, doi = {10.3905/jfi.2004.391030}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The problem of valuing interest-dependent securities depends upon accurate estimation of the term structure of interest rates, especially when the cash flows of the securities being valued do not fall on the same dates as the cash flows of the instruments from which the term structure is estimated. Previously published interpolation methods smooth par yields of bonds (or swaps) and then employ the bootstrap method to estimate zero-coupon present value factors. With this approach, when the securities are re-priced using the estimated present value factors, the security prices so obtained will not equal the original prices. By contrast, the interpolation methodology presented in this article operates directly on prices rather than par yields. The methodology guarantees that when the securities from which the present value factors are derived are re-priced using interpolated present value factors, the original set of security prices will be returned. The method is tested using hypothetical term structures and related bond prices generated by the Longstaff-Schwartz model and shown to be very accurate in returning present value factors that are almost identical to their theoretically correct values.}, issn = {1059-8596}, URL = {https://jfi.pm-research.com/content/13/4/80}, eprint = {https://jfi.pm-research.com/content/13/4/80.full.pdf}, journal = {The Journal of Fixed Income} }