Forward Curves

An overview of forward curves, their construction using market data and bootstrapping, and their key applications in financial modeling and risk management.

What Are Forward Curves?

Forward curves represent expected interest rates at different points in the future. They’re widely used in:

• Debt Structuring: To forecast borrowing costs.

• Swap Pricing: To calculate future cashflows in interest rate swaps.

• Risk Management: To assess exposure to interest rate changes.

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How We Calculate Forward Curves

We build each forward curve by bootstrapping from the latest market swap rates, with the index's latest published fixing anchoring the short end: working tenor by tenor, we solve for the discount factors that price each swap at par, and the forward rates follow from those discount factors. Where the inputs come from is covered in Where does BlueGamma's data come from?, and the method step by step in How We Bootstrap the Yield Curve.