Market Data needs to be calibrated to their corresponding price models in order to construct a risk neutral calibration. Bootstrapping is the general term used to fit models to data via optimizers. It is a form of calibration that typically only looks at current market data with no reference to any historical data.

Generally, if is the price factor that needs to be calculated from benchmark deals, then the deal has:

  • an observed quoted market value
  • a net value
  • a surface point

The points should satisfy and the process of bootstrapping results in a price factor such that for all .