# Questions tagged [interest-rates]

An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor).

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### Why is the annuity factor proportional to the CV01?

For an asset with par amount of one unit (with a semiannual payment regime) we have $$\frac{C(T)}{2}\sum_{t=1}^{2T}d\Big(\frac{t}{2}\Big) + d(T) = 1$$ $$\implies\frac{C(T)}{2}A(T) + d(T) = 1,$$ ...
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### Do CDS have interest rate exposure?

For hedging purposes, do CDS have interest rate exposure? I've thought of CDS as a pretty direct proxy for credit risk, but on the other hand say if interest rates rise it would be harder for ...
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### Conversion of annual interest rate compounded monthly to monthly effective interest rate [closed]

I am given that the annual interest rate is $r=4\%$ and that it is compounded monthly. I have to find the monthly effective interest rate. If I wanted the annual effective interest rate, I would use ...
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### Martingale measure result application for interest rates under T-forward measure?

I've got a question about the way the equivalent martingale measure result is used for pricing derivatives. Hull states the result as the next equality: \begin{align*} f_o = g_0 E^{g}\big(\frac{f_T}{...
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### Black & Scholes with stochastic interest rate [duplicate]

Consider the following model $$\begin{cases} dS_t=r_tS_tdt+\sigma S_tdW_t, \\ dr_t=adt+\eta dW_t\\ \end{cases}$$ where $W$ is a Brownian motion and $\sigma, a ,b, \eta$ are positive constants. I ...