Skip to content

Forward Pricing Model (formula)

January 4, 2016

Can convert spot rates to spot prices by taking the inverse. The use the following formula:

P(T*+T) = P(T*)F(T*,T)

so

P(2) = P(1)F(1,1)

P(1) = Price at time one

F(1,1) = one year forward rate

Advertisements

From → Asset Valuation

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: