Forward rates, Financial Management

Assignment Help:

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.


Related Discussions:- Forward rates

No title, discuss the steps in the controlling process

discuss the steps in the controlling process

Distinguish between a promissory note and a bill of exchange, QUESTION ...

QUESTION (a) "A promissory note is an instrument in writing (not being a blank or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certai

Explain the procedure for cost benefit analysis, Question 1: i) Pe...

Question 1: i) Performance budgeting is the best budgeting system. Discuss. ii) Why there is a need for implementing MTEF in the Mauritian Public Sector? Questi

Leverage, importance of Leverage

importance of Leverage

Securities and exchange commission of usa, SECURITIES AND EXCHANGE COMMISSI...

SECURITIES AND EXCHANGE COMMISSION OF USA In the United States, securities industry is regulated by the United States Securities and Exchange Commission (SEC). It is the govern

Callable bonds, Basics of  Callable Bonds A callable b...

Basics of  Callable Bonds A callable bond is a convertible bond with the favorable feature of call option available to the issuer. When the fir

Treasury strips, A treasury strip can be sold in two parts based on i...

A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treas

What is post-acquisition integration, Post-acquisition integration In o...

Post-acquisition integration In order to have constructive discussions between organisations, it's strongly recommended that all participants in process adopt a set of ground r

Full, Full, Fair and Adequate Disclosure The architecture of business...

Full, Fair and Adequate Disclosure The architecture of business has evolved from proprietorship to partnership to joint stock companies or publicly held companies. Except fro

Define the matching principle of working capital financing, What is the mat...

What is the matching principle of working capital financing?  What are the advantages of following this principle? The matching principle is while short-term financing is employe

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd