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48 Economic Analysis (2010, Vol. 43, No. 1-2, 44-49) The particular zero coupon yields are depictured in Table 1. and Figure 1. Table 1. Particular zero coupon yields (in per cent p. a.) 1 5,439% 2 5,762% 3 5,995% 4 6,164% 5 6,294% 6 6,393% 7 6,470% 8 6,533% 9 6,582% 10 6,621% Figure 1. Theoretical spot rate curve Conclusion The yield curve (or the term structure of interest rates) shows the relationship between the yields on a set of comparable bonds and the term to maturity. Based upon this yield curve, it is possible to derive a theoretical spot rate curve. Such as basic method applied for derivation of the yield curve (or several theoretical spot rates) is the bootstrapping method. Unfortunately, there is great computing severity related to this method. Fortunately, however, the application of matrix theory helps us to solve this issue very well, as we suggested in this paper. In turn, these spot rates can be used to value bonds using an individual spot rate for each cash flow. This valuation approach is becoming more useful in a world where bonds have very different cash flows. In addition, these spot rates imply investor expectations about future rates referred to as forward rates.
References Glova, J., Matrix Theory Application in the Bootstrapping, EA (2010, Vol. 43, No, 1-2, 44-49) 49 Campbell, J. Y. (1986), “A Defense of Traditional Hypotheses about the Term Structure of Interest Rates,” <strong>Journal</strong> of Finance, 41: 183–193. Cox, J. C., Ingersoll, J. E. and S. A. Ross (1985), “A Theory of the Term Structure of Interest Rates,” Econometrica, 53: 385–408. Nawalkha, S. K., and D. R. Chambers (1999), “Interest Rate Risk Measurement and Management”, New York: Institutional Investor. Šoltés, V., Šoltés, M. (2007), “Maximum and Limit Value of the Duration of the Coupon Bond, In: Economics and Management, 10 (4): 87–91. Article history: Received: 12 January 2010 Accepted: 15 March 2010
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