Forward rates, Financial Management

Now that we have seen how default-free theoretical rate can be extrapolated from the treasury yield curve, let us see how some other additional information, like forward rates, can be extrapolated from the default-free theoretical spot rate.

Examples of forward rates that can be calculated from the default-free theoretical spot rate curve are as follows:

  • 3-month forward rate three months from now.

  • 6-month forward rate six months from now.

  • 1-year forward rate one year from now.

  • 5-year forward rate three years form now.

Forward rates are also known as implicit forward rates because they are implicitly extrapolated from the default-free theoretical spot rate curve.

Posted Date: 9/10/2012 2:39:30 AM | Location : United States







Related Discussions:- Forward rates, Assignment Help, Ask Question on Forward rates, Get Answer, Expert's Help, Forward rates Discussions

Write discussion on Forward rates
Your posts are moderated
Related Questions
a) Define monetary policy, and discuss the operation of monetary policy in the United States post-GFC.

As we know that price of option-free bond changes in the opposite direction from a change in bond's required yield, Table 1 and figure 1 explains this feature of

Ricardo Martinez has prepared the following financial statement projections as part of his business plan for starting the Martinez Products Corporation.  The venture is to manufact

Optimal Portfolio Selection: The next step involves selecting the optimal portfolio. The strategic asset allocation will have overriding importance in pension fund management.

Elements of Financial Management: Financial management is the term given to the overall management of an organisation's finances. It includes a number of elements, or systems,

a Suppose you are the TA of Econ 3602 and one student does not know how to derive the DD schedule. Show this student how to derive the DD schedule. Support your answer with equatio

Clean Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). Also called UNQUALIFIED OPINION

Role of Primary Dealers To promote the investment activity in the Government Securities market, several countries have adopted licensed Primary Dealers (PDs) as important inter

Determination of explicit cost of capital Approach of determination of explicit cost of capital is similar to the one used to ascertain IRR, with one difference, in case of co

Define why we measure a project’s risk as the change in the CV. We calculate a project’s risk as the change in the coefficient of variation since this focuses on the change in