L9b Zero Curve.pptx - Excel Modeling VBA Bond Pricing Zero Curve(Ch 10 S Dr Ronald K CHUNG FINA0404/3351 – Spreadsheet Modelling in Finance Time and

L9b Zero Curve.pptx - Excel Modeling VBA Bond Pricing Zero...

This preview shows page 1 - 6 out of 19 pages.

Excel Modeling: VBA Bond Pricing & Zero Curve (Ch 10, S) Dr. Ronald K. CHUNG FINA0404/3351 – Spreadsheet Modelling in Finance
Image of page 1

Subscribe to view the full document.

Time and YTM (Ch 10, S)
Image of page 2
Spot and Forward Rates S pot rate: a rate agreed upon today for a loan to be made today. (e.g. r 1 =5% the current rate for a one-year loan is 5%). F orward rate: a rate agreed upon today for a loan to be made in the future. (e.g. 2 f 1 =7% contract today to borrow money at 7% for 1 yr, starting 2 yrs from today).
Image of page 3

Subscribe to view the full document.

Spot and Forward Rates S pot rates : a rate agreed upon today (e.g., r 1 =5.00%, r 2 =5.75%, r 3 =6.00%) We can either: Invest $100 for three years , or: Invest $100 for two years, and contract (today) at the one year rate, two years forward F orward rate: a rate agreed upon today (e.g. 2 f 1 =?% contract today to borrow money at 7% for 1 yr, starting in 2 yrs).
Image of page 4
Forward Rates: no arbitrage Which investment strategy is optimal: Invest $100 for 3 years: $100*(1.06) 3 = Invest $100 for 2 years, and invest the proceeds at the 2-year forward rate: $100*(1.0575) 2 (1+ 2 f 1 ) =
Image of page 5

Subscribe to view the full document.

Image of page 6
  • Spring '17
  • Forward contract, Forward price, Spot price, c DFt,  Forward rate

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes