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Suppose the 1-year and 10-year LIBOR-for-fixed swap rates are 3% and X% (with annual payments). The 1-year and 10-year OIS swap rates are 50 basis

Suppose the 1-year and 10-year LIBOR-for-fixed swap rates are 3% and X% (with annual payments). The 1-year and 10-year OIS swap rates are 50 basis points lower than the corresponding LIBOR-for-fixed swap rates.

Use the zero-curve worksheet in Deriva- Gem to investigate the difference between the 10-year LIBOR zero rate with OIS discounting and the 10-year LIBOR zero rate with LIBOR discounting. In particular, consider what happens as X increases from 3 to 10 ?

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