Probably a stupid question but I am a bit lost here… It seems like we compute the discount factor using the px of the bond and the par value at maturity. And we find the price of a bond by discounting the cash flows using discount rates (or spot rates which are derived from discount rates). But isn’t this a loop? In real life, which is available first? Discount rates or bond prices?
Bid and ask prices are quoted in real life. The author likes to use the discount factors for some reason. I thought it was strange last year and I took level 1.