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 5-year swap rate over the 3-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 3-month LIBOR rate minus the 3-month Treasury bill rate. The payot occurs 90 days after the rates are observed.