Par yield curve, Bootstrapping and everything in between

I understand the bits and pieces but I’m having a difficult time getting a solid conceptual idea of the bootstrapping process. I understand that bootstrapping is necessary in the valuation of fixed income securities because we have to utilize a discount rate in the same time dimension as the cash flow. I did quantitative examples to compute theoretical spot rates and I’ve had no problem there. But that’s only b/c I’m following a process, I’m missing the logic. Separately, I get what the Par Yield Curve and the process of interpolation. But how exactly does the Par Yield Curve and interpolation come into play in the bootstrapping process? Do they even? I’ve been doing all the internet search I can and my mind just keeps going in circles. If anyone can just set everything into place Id really appreciate it!

Elan’s stuff was pretty good on this. Email them and request a pdf of that reading. A friend of mine asked for their stuff on ARO and they sent it to her.

Thanks for the advice! I did that and they sent me the sample, so nice of them! And you’re right, the reading helped a lot. Honestly, if I would’ve known earlier, probably would’ve went with Elan Guides when purchasing study guides.

one thing i dont understand is…why do we use the Annual Par Yield to Maturity when calculating the Cash Flow for a given spot rate. Why not use the coupons semiannual rate?

Not sure what you are trying to ask. More details please

Yield is better for valuation - represents opportunity cost. Coupons rate translate into actual cash flows really, not necessarily cost of capital. They should only be used as cost of capital when you have no way of knowing the yield.