Quotation Frühwirth, Manfred. 2015. Forward Interest Rates. Online-Wörterbuch der Wirtschaftswissenschaften. WiWi-Media AG. http://www.odww.de/index.php?navID=100&uid=646


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Abstract

The article describes the concept of one-period and multi-period forward interest rates. Moreover, the article shows the relationship between different types of interest rates and related variables. This includes the relationship between one-period forward rates and discount factors, between one-period forward rates and spot interest rates and between one-period forward rates and multi-period forward rates. These relationships are quantified by comparing buy and hold strategies with roll over strategies and using the concept of no-arbitrage. Numerical examples are used in order to illustrate some of these relationships. The article also includes an excursion into the expectations hypothesis of interest rates, covering the relationship between contemporaneous forward rates and future spot rates. The article concludes with a link to the Heath/Jarrow/Morton models used in order to price interest rate derivatives.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication eBook/chapter in eBook
Language English
Title Forward Interest Rates
Title of whole publication Online-Wörterbuch der Wirtschaftswissenschaften
Editor WiWi-Media AG
Year 2015
URL http://www.odww.de/index.php?navID=100&uid=646

Associations

People
Frühwirth, Manfred (Details)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5300 Economics (Details)
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