Question
(a) The 6-month, 1-year, and 1.5-year LIBOR spot rates are, respectively, 3.5%, 3.6%, and 3.8% per annum with continuous compounding. Find the continuously compounded LIBOR
(a) The 6-month, 1-year, and 1.5-year LIBOR spot rates are, respectively, 3.5%, 3.6%, and 3.8% per annum with continuous compounding. Find the continuously compounded LIBOR forward rates for the six-month period starting in six months from today, and for the six-month period starting in one year from today.
(b) Compute the semiannually compounded 6-month LIBOR spot rate and the semiannually compounded LIBOR forward rates for the six-month period starting in six months from today, and for the six-month period starting in one year from today.
(c) The 6-month,1-year, and 1.5-year OIS spot rates are, respectively, 3.3%, 3.4%, and 3.6% per annum with continuous compounding. Use these OIS rates and the LIBOR rates from part (b) to determine the semiannually compounded swap rate for a 1.5-year LIBOR swap. The swap agreement specifies semiannual payments.
(d) Calculate the value of all the forward rate agreements underlying this swap for the party receiving the swap rate on a principal of $10,000.
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Fundamentals of Investments Valuation and Management
Authors: Bradford Jordan, Thomas Miller
7th edition
978-0078096785, 78096782, 978-0077861636, 77861639, 978-0078115660
