Using Above-Par Zero-Coupon Bonds in Curve Construction

Summary

The document raises a fixed-income curve-construction question: whether zero-coupon bonds priced above par should be excluded when building a zero-coupon curve. It notes that textbook bootstrapping examples often use below-par bonds, which can make above-par observations seem unsuitable as inputs.

The text does not provide a method, worked example, evidence, or answer. It therefore identifies a practical modeling question rather than resolving it. The price being above par alone is not discussed as a reason to include or discard a bond, and the document gives no details about curve conventions, data quality, or instrument eligibility that might guide that decision.

Key ideas

• The document asks whether above-par zero-coupon bonds should be used to build a zero-coupon curve.
• Textbook bootstrapping examples commonly emphasize below-par bonds.
• The document does not provide a conclusion or construction method.

Tags

# Using above par zero coupon bond to build a zero coupon curve


# Using above par zero coupon bond to build a zero coupon curve












Should I discard bonds above par (zero coupon bond with market price over par value) when I build a zero coupon curve?

Most of the academic textbooks use bonds below par as inputs to build Zero Coupon Curve (to show bootstrapping methodology). So, I wonder what happen whit bonds above par value. Should I use them?

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.