What is the continuously compounded forward rate, Mathematics

Assignment Help:

At time t an investor shorts a $1 face value zero coupon bond that matures at time T = t

and uses the entire proceeds to purchase a zero coupon bond that matures at time S = T.

(a) In what quantity is the zero coupon bond that matures at time S purchased? Your answer should be expressed in terms of the time t prices P(t;T) and P (t;S).

(b) Explain why these transactions are equivalent to agreeing to lend over the future period [T, S] at a rate that is determined at time t.

Related Discussions:- What is the continuously compounded forward rate

Find out the x-y coordinates of the points - tangents, Find out the x-y coo...

Find out the x-y coordinates of the points in which the following parametric equations will have horizontal or vertical tangents. x = t 3 - 3t y = 3t 2 - 9 Solut

Find the derivatives, Find the derivatives of the following functions a)...

Find the derivatives of the following functions a) y = 5x 4 +3x -1-x 3 b) y = (x+1) -1/2 c) y= e x2+1 d) y= e 3x lnx e) y =ln(x+1/x)y

Solid Mensuration, The two sides of a triangle are 17 cm and 28 cm long, an...

The two sides of a triangle are 17 cm and 28 cm long, and the length of the median drawn to the third side is equal to 19.5 cm. Find the distance from an endpoint of this median to

Alternate segment theorem , explanation

explanation

Right angled triangle, In proving relation of trigonometric ratios we becam...

In proving relation of trigonometric ratios we became confused that what should we do next, so to complete any question quickly what should we do?

Multipliying decimals / money, 13.8 times by 5

13.8 times by 5

Discrete mathematics, how to calculate double summations

how to calculate double summations

What is the limit of sin (1/x) when x tends to zero?, As x tends to zero th...

As x tends to zero the value of 1/x tends to either ∞ or -∞. In this situation we will not be sure about the exact value of 1/x. As a result we will not be sure about the exact/app

Properties for exponents, The next thing that we must acknowledge is that a...

The next thing that we must acknowledge is that all of the properties for exponents . This includes the more general rational exponent that we haven't looked at yet. Now the pr

Find no. of non negative integral solutions, Find no. of non negative integ...

Find no. of non negative integral solutions x 1 +x 2 +x 3 +4x 4 =20 Solution) 140. Break them into prime factors . Put 4 = 2^2 and every variable will have factors in 2,3,5 with

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages