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A swap dealer has just entered into a two-year swap contract to semiannually exchange a fixed-rate interest for sixmonth LIBOR interest on $100 million. Six-month
A swap dealer has just entered into a two-year swap contract to semiannually exchange a fixed-rate interest for sixmonth LIBOR interest on $100 million. Six-month and twelve-month LIBOR rates are 3% and 3.125%, respectively. The 12 × 18 and 18 × 24 LIBOR forward rates are 3.5% and 3.75%, respectively. Estimate the two-year swap rate. All rates are expressed with continuous compounding.
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
