Explain whether any convexity or timing adjustments are necessary when
(a) We wish to value a spread option that pays off every quarter the excess (if any) of the five-year swap rate over the three-month LIBOR rate applied to a principal of $100. The payoff occurs 90 days after the rates are observed.
(b) We wish to value a derivative that pays off every quarter the three-month LIBOR rate minus the three-month Treasury bill rate. The payoff occurs 90 days after the rates are observed.