7
$\begingroup$

So this is a "work homework" question. As part of my job they are sending us through sort of a training course. I'm looking for advice, or a link to a site that explains how to do this with maybe some formulas or something. I am NOT looking for answers. I want to figure this stuff out myself, I just need a little guidance.

Here is the question:

Given Information

3-month Libor 1.85%

6-month Libor 1.94625%

12-month Libor 2.06%

Find the following:

3-month Libor 3 months forward

6-month Libor 6 months forward

3-month Libor 6 months forward

3-month Libor 9 months forward

ASSUMPTION

Assume 30/360 day count and even quarterly periods

Thanks guys.

Improve this question
$\endgroup$
1
  • $\begingroup$ if these were actual data, at the moment you raised the question, does it happen you to have the observed values for the rates you were asking? (What was the 3ML after 3M, what was the 6ML after 6 M, etc) And could you say the currency these Libors are for? $\endgroup$
    – user7056
    Commented Aug 30, 2012 at 15:53

2 Answers 2

Reset to default
4
$\begingroup$

If you are looking for good explanation with example than you may want to consider reading Jim Harper aka Bionic Turtle and his article on forward rates and spot rates. You can find excel spreadsheet for given example there as well.

Improve this answer
$\endgroup$
3
  • $\begingroup$ I got 2.033% for the first one and 2.152% for the second, but how do I get the 9 month libor rate? don't i need that to solve the last 2? $\endgroup$
    – slandau
    Commented Feb 23, 2011 at 18:41
  • $\begingroup$ You know the 9-month Libor is between 1.94625% and 2.06%, so you can get some estimates for the last two? You also know the relation between the last 2 (they must "add" to 2.152%). This might get you some fairly tight estimates. $\endgroup$
    – user59
    Commented Feb 24, 2011 at 0:49
  • $\begingroup$ @AndreyTaptunov your embedded link to Bionic Turtle is no longer available. I am not sure if this is as same as his video tutoril on Youtube. I still find it hard to apply the concept to a question I have and most probably I will post it. $\endgroup$
    – bonCodigo
    Commented May 23, 2014 at 22:45
2
$\begingroup$

Another good resource is "Investment Science" by David Luenberger (chapter 4). I'm actually doing "school homework" on the subject right now. I'm guessing you'll find this book good for future assignments as well.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.