An iterative numerical methodology that is used to construct the spot zero rate curve implied by coupon-bearing, usually Treasury, bonds. By this methodology it is possible to sequentially extract the arbitrage-free, longer-term spot zero rates and observable prices on coupon bonds.

Using swap rates, the swap market yield curve (which is also referred to as the LIBOR curve) is usually constructed by splicing together the rates from most-liquid or equivalent market instruments. In other words, bootstrapping can be used to extract short-tenor, intermediate-tenor, and long-tenor spot zero swap rates from cash deposit rates, IMM futures rates, and par swap rates, respectively. The LIBOR curve can be constructed using combinations of market rates (cash rates and futures rates and swap rates).

Bootstrapping is also known zero coupon stripping.