Swap spreads: Assume the following term structure of risky and riskless interest rates (all rates are annually compounded, annual rates): Year Riskless (%) Risky (%) 1 6.91 7.33 2 7.00 7.40 3 7.15 7.59 4 7.22 7.63 5 7.29 7.70 6 7.33 7.75 7 7.35 7.79 8 7.38 7.85 9 7.40 7.90 10 7.40 7.93 Further assume that securities (zero-coupon bonds) for both types exist and can be bought or sold short at these rates. (a) Compute the 1–year forward rates between each maturity for both term-structures. (b) Swap 1 is a 10–year fixed-for-floating swap for riskless counterparties using the riskless 1–year floating rate, and swap 2 is a 10-year fixed–for–floating swap for risky counterparties using the risky 1–year floating rate. Compute the swap spread for swap 2. Note that The swap spread for a swap contract is its swap rate minus the riskless swap rate. So you need to compute the fair (par)rates for both swaps
SOLUTION
Solution:
15% off for this assignment.
Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!
Why US?
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Money Back
If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.