Question
Six-month LIBOR is 5%. LIBOR forward rates for the 6- to 12-month period and for the 12 to 18-month period are both 5.5%. Swap rates
Six-month LIBOR is 5%. LIBOR forward rates for the 6- to 12-month period and for the 12
to 18-month period are both 5.5%. Swap rates for 2-year semiannual payment swaps are 5.4%.
Assume the day count (year fraction) on both legs are = 0.5. Standing at time 0, estimate the
LIBOR forward rates for period starting in 18-month and ending in 2 years. Assume the OIS zero
rate (continuously compounding annualized risk free rate) is 4.5% for all maturities.
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Public Finance A Contemporary Application of Theory to Policy
Authors: David N Hyman
11th edition
9781305474253, 1285173953, 1305474252, 978-1285173955
