RMontgomery

So, I am assuming the first yield curve is tradeable. In that case, you buy/sell the rates where the market curve is too high/low, based on your theoretical model. Easiest way is to do bullet bonds with the maturity that you want, but obviously, there are many ways.
The question seems kind of vague. For instance, if the first curve is tradeable, why is your theoretical curve not marked to market? Or what pnl should you recognize if the market is not the same as your “theoretical” level? What is the theoretical level based on anyway?