Yield Curve Tnb


Yield Curve Tnb is a
direct subtype of Yield Curve Input with functions Yield Curve Tnb Functions, keys Yield Curve Tnb keys and example object YldCrvTnb that represents market rates of interest rate tenor basis swaps that may be used as input to a yield curve construction.

Web blog example
here

Technically, the mentioned curve is created by feeding an object of this type as value next to the key
Market Data in the formula that creates the Yield Curve object.

Two indices of differing tenor must be provided and they referred as the short and long index.
Any one of these two indices must be accompanied by an exogenously provided yield curve, which is used to predict the future fixings of the respective tenor.
Then the input market spreads refer to tenor basis swaps between the specified short and long index and are assumed to be added to either the short or the long index.
The discount factors associated with the other index (the one without the yield curve) are then constructed in such a way that each input tenor basis swap is valued to equal exactly zero.
Optionally an exogenous discounting yield curve may be used to discount cash flows associated with the index being bootstrapped, which effectively amounts to exogenous dual bootstrapping.
In the latter case, the produced curve can be used to forecast the bootstrapped index whenever collateralized cash flows linked to that index need to be valued.