Tag Info

New answers tagged spot-rate

0

Using the $T$-forward measure $Q^T$, where the numeraire is the price of the zero-coupon bond $p(t, T)$ maturing at time $T$, we can see that the forward rate is the expectation of the future short rate $r_T$: $$f(t,T) = \mathbb{E}^T \left[ r_T \mid \mathcal{F}_t \right] \, .$$ See chapter 26 of Tomas' book ...

Top 50 recent answers are included