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I know 3-month Eurodollar future prices and need to convert it to 6-month LIBOR.

I calculated the 3-month LIBOR as : (100 - ED price) / 100

How to continue from here?

Thanks for the help.

Edit: I can do the assumption that there's no difference basis between swaps that have 3- or 6-month libor as the floating leg. End goal is to calculate a swap floating leg as 6-month libor.

Billy

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    $\begingroup$ Don't do this. 3mo Libor and 6 mo Libor have different risk, liquidity, etc. which furthermore vary over time. It is not possible to convert one to the other, and setting them the same is inaccurate (even if approximately correct). They must be sourced separately from market quotations. $\endgroup$ – noob2 Mar 20 at 19:02
  • $\begingroup$ What if I can do the assumption that there's no difference basis between swaps that have 3- or 6-month libor as the floating leg? $\endgroup$ – Billy Walsh Mar 20 at 19:07
  • $\begingroup$ Then you would have 1+Libor6mo/2 = (1+Libor3mo/4)**2 $\endgroup$ – noob2 Mar 20 at 19:27
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    $\begingroup$ Can I do the calculation as: 1 + Libor6mo_t+1/2 = (1 + Libor3mo_t /4) (1 + Libor3mo_t+1/4) Since I know from the ED the Libors at different times and thanks for your answers $\endgroup$ – Billy Walsh Mar 20 at 20:03
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    $\begingroup$ Yes. But remember you are not really supposed to do this conversion in general, because of the (non-zero) basis. $\endgroup$ – noob2 Mar 20 at 21:21

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