Question
Details: The necessary Market data (interest rates, cap and swaption vol) is provided in the csv files on the Moodle assignment page Today's date is
Details:
The necessary Market data (interest rates, cap and swaption vol) is provided in the csv files on the Moodle assignment page Today's date is January 15th 2007 and, to finance an investment project, a company entered into a floating rate loan agreement with the following details:
Notional: EUR 1,748,653.15
Start: 19-01-2007
Maturity: 19-01-2022
Interest: Euribor 6M, half-yearly, act/360, modified following, adjusted
Exercise 1: 1. What are the estimated cash flows of this loan on the 15th of January of 2007?
Forward Rates calculation out of FRAs for swaps valuation. PV
Basically I have interest rates (part of if, as it goes daily until dec-18th 2020) and I need to get the forward rates out of them in order to calculate the discount factors and get the PV of the Swap. I already have the summary table but I am only missing the fwds. I know that fwds can be obtained by boostrapping the spot rates of the swaps. The issue is that I do not know which are the spot rates (it must be a combination of column and dates from the market table.
I already build the table and added the first fwd which is equal a 6M deposit on 2007-01-19. My doubts come to which numbers to use from the interest rates table.
| Start | End | Notional | dcf | fwd | cf | df | pv |
| 2007-01-19 | 2007-07-19 | 1,748,653.15 | 0.5027777778 | 0.03888 | 34,182.67178 | 0.9808267978 | 33527.2805 |
| 2007-07-19 | 2008-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2008-01-19 | 2008-07-19 | 1,748,653.15 | 0.5055555556 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2008-07-19 | 2009-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2009-01-19 | 2009-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2009-07-19 | 2010-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2010-01-19 | 2010-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2010-07-19 | 2011-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2011-01-19 | 2011-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2011-07-19 | 2012-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2012-01-19 | 2012-07-19 | 1,748,653.15 | 0.5055555556 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2012-07-19 | 2013-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2013-01-19 | 2013-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2013-07-19 | 2014-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2014-01-19 | 2014-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2014-07-19 | 2015-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2015-01-19 | 2015-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2015-07-19 | 2016-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2016-01-19 | 2016-07-19 | 1,748,653.15 | 0.5055555556 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2016-07-19 | 2017-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2017-01-19 | 2017-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2017-07-19 | 2018-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2018-01-19 | 2018-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2018-07-19 | 2019-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2019-01-19 | 2019-07-19 | 1,748,653.15 | 0.5027777778 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2019-07-19 | 2020-01-19 | 1,748,653.15 | 0.5111111111 | 1,748,653.15000 | 1 | 1748653.15 | |
| 2020-01-19 | 2020-07-19 | 1,748,653.15 | 0.5055555556 | 1,748,653.15000 | 1 | 1748653.15 |
interest rates table: .. columns goes until 2020-18-12. by comparing the end dates from my summary table and the dates (adjusted following) I can identify the row but which column to use? HOW FRA can be converted to Forward rates? Thanks in advance. I just need to understand the mechanics.
| Deposit 6M | FRA 1X7 | FRA 2X8 | FRA 3X9 | FRA 4X10 | FRA 5X11 | FRA 6X12 | FRA 7X13 | FRA 8X14 | FRA 9X15 | FRA 10X16 | FRA 11X17 | FRA 12X18 | Swap 2Y | Swap 3Y | Swap 4Y | Swap 5Y | Swap 6Y | Swap 7Y | Swap 8Y | Swap 9Y | Swap 10Y | Swap 11Y | Swap 12Y | Swap 15Y | Swap 20Y | Swap 25Y | Swap 30Y | Swap 40Y | Swap 50Y | |
| 1/2/2007 | 3.857 | 3.9285 | 3.977 | 4.0155 | 4.0455 | 4.0755 | 4.0975 | 4.0965 | 4.101 | 4.1005 | 4.0915 | 4.0795 | 4.069 | 4.1075 | 4.1065 | 4.094 | 4.092 | 4.1055 | 4.1175 | 4.1335 | 4.152 | 4.172 | 4.187 | 4.206 | 4.2445 | 4.284 | 4.275 | 4.259 | 4.216 | 4.174 |
| 1/3/2007 | 3.86 | 3.917 | 3.972 | 4.0145 | 4.041 | 4.067 | 4.082 | 4.087 | 4.092 | 4.089 | 4.08 | 4.071 | 4.0505 | 4.0985 | 4.0955 | 4.095 | 4.095 | 4.103 | 4.1155 | 4.1325 | 4.1505 | 4.1715 | 4.1885 | 4.2045 | 4.258 | 4.2845 | 4.295 | 4.2635 | 4.2205 | 4.1785 |
| 1/4/2007 | 3.865 | 3.9315 | 3.9865 | 4.0225 | 4.0435 | 4.072 | 4.0915 | 4.0975 | 4.1025 | 4.0985 | 4.091 | 4.081 | 4.0565 | 4.1075 | 4.0995 | 4.095 | 4.094 | 4.099 | 4.111 | 4.1255 | 4.1445 | 4.1625 | 4.1815 | 4.1985 | 4.2455 | 4.2755 | 4.278 | 4.2565 | 4.2145 | 4.1725 |
| 1/5/2007 | 3.864 | 3.9415 | 3.995 | 4.041 | 4.071 | 4.095 | 4.122 | 4.1305 | 4.1365 | 4.1325 | 4.1275 | 4.1195 | 4.0975 | 4.1345 | 4.1355 | 4.131 | 4.134 | 4.1405 | 4.1525 | 4.1695 | 4.1875 | 4.2055 | 4.2235 | 4.2405 | 4.2885 | 4.3175 | 4.329 | 4.297 | 4.255 | 4.215 |
| 1/8/2007 | 3.874 | 3.9435 | 4.0015 | 4.0435 | 4.0695 | 4.0985 | 4.1225 | 4.1215 | 4.1275 | 4.1235 | 4.1175 | 4.1075 | 4.0915 | 4.1305 | 4.1275 | 4.1255 | 4.1275 | 4.136 | 4.1485 | 4.1665 | 4.186 | 4.206 | 4.226 | 4.242 | 4.2885 | 4.32 | 4.321 | 4.3 | 4.259 | 4.22 |
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