Bond valuation questions par, valuation, developed, following, regarding

scruge

Hi Guys,

Happy Diwali to you all!

I have following two queries regarding valuation of Bond

1) Why decrease in volatility of Interest Rate (yield) decreases the value of embedded options in a Bond?

2) For Boorstraping, you need a par yield curve, but do you always get a par yield curve even in developed economies? Can you not do bootstraping with the treasury instruments (of 6 monthly intervals) at whatever prices they are quoted at?

Many thanks in advance.