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How to calculate annualized Swap Rate (from quarterly data)

June 1, 2017

You’ll be most likely given four interest rates or discount factors.

Maturity Annualized Rate Discount Factor
90 R1 1 /(1 + (R1 * (90/360))) = Z1
180 R2 1 /(1 + (R2 * (180/360))) = Z2
270 R3 1 /(1 + (R3 * (270/360))) = Z3
360 R4 1 /(1 + (R4 * (360/360))) = Z4

C = (1 – Z4) / (Z1 + Z2 + Z3 + Z4)

Assuming quarterly date Annualized Swap Rate = 4C or C/(90/360)

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From → Asset Valuation

3 Comments
  1. Aram permalink

    Shouldn’t be the last one 1+R4 360/360? You wrote 90/360.

  2. Yeah, sorry cutting and pasting typo…

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