Despite its obvious advantages for accounting purposes, conventional accounting methods do not work well in risk-management and the execution of transactions. The article presents a short analysis of the reasons underlying the application of such accounting methods as well as the analysis of factors that should induce their users to abandon their application in all instances where they are not required by legal regulations. According to the author, preference should be given to market methods, which in most cases necessitate the creation of profitability curves. A vast number of methods for the creation of profitability models is offered by the professional literature; however, in most cases, the models require some additional simplification or assumptions to be of practical use. Typically, certain requirements with respect to regularity (as overlapping cashflows of individual instruments) should be imposed on the data entered, but this is not often done. While some methods, based on statistical methods, do not impose such requirements, the curves they produce do not correspond fully with the market parameters and they offer only a coarse approximation in the evaluation of financial instruments.

The text gives a short review of curve creation methods accompanied by the analysis of selected problem issues in conjunction with their real-life application. In the second part of the article, a method for the creation of profitability curves derived from bootstrapping is presented. Although the method is not ideal for every solution, it does not cause the above-mentioned problems, since it:

Apart from the curve determining method, the article discusses two practical aspects, including the choice of instruments which serve as the entry data for the model and the mode of operation in the case that prices of the entry instruments are not available at a particular time (e.g. on a non-working day).