How to Calculate Forward Rates from Spot Rates?
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Once we have the spot rate curve, we can easily use it to derive the forward rates. The key idea is to satisfy the no arbitrage condition – no two investors should be able to earn a return from arbitraging between different interest periods. Let’s take an example of how this works. Let’s say an investor wants to invests his funds for two years. He is faced with two choices:
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This tutorial is a part of the course Yield Measures, Spot Rates, and Forward Rates. This is a premium course. The purchase options for the course are provided below. With this course, you get access to complete course content, source code, practical exercises, and all resources that are a part of the course.
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