PT - JOURNAL ARTICLE AU - David J. Novak TI - The Bootstrap Algorithm, Par Swaps, and the FRN Method AID - 10.3905/jod.2000.319150 DP - 2000 Nov 30 TA - The Journal of Derivatives PG - 51--54 VI - 8 IP - 2 4099 - https://pm-research.com/content/8/2/51.short 4100 - https://pm-research.com/content/8/2/51.full AB - One of the major developments in interest rate modeling has been the requirement that a viable theoretical model needs to be “arbitrage-free.” It is therefore unsettling when the same quantity, e.g., the theoretical value of a given swap, calculated in two different ways from the same data yields slightly different answers. Novak demonstrates that alternative standard procedures for pricing a swap can produce that result, due to a slight inconsistency between them in how the day-count conventions are handled in the calculation.