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5. The current term structure of quarterly compounding forward rates is given by f;(0)=0.01+0.0003x j, j =0,...,119. Use
Posted: Mon Nov 15, 2021 5:00 pm
by answerhappygod
- 5 The Current Term Structure Of Quarterly Compounding Forward Rates Is Given By F 0 0 01 0 0003x J J 0 119 Use 1 (38.93 KiB) Viewed 97 times
5. The current term structure of quarterly compounding forward rates is given by f;(0)=0.01+0.0003x j, j =0,...,119. Use the Black formula to price a 10-year cap with notional value of $1m and the ATM strike rate, i.e., the 10-year ATM swap rate. Note that the payment frequency is a quarter year for caps. 5.1. Calculate the 10-year swap rate (Note that the fixed leg has semi-annual payment). 5.2. Price the 10-year maturity cap for the ATM strike rate, take a uniform forward rate volatility to be 25%.