You observe the following OIS swap rates: Payments Only at maturity Only at maturity Annually Maturity...
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You observe the following OIS swap rates: Payments Only at maturity Only at maturity Annually Maturity 6 mo. 1 yr. 2 yr. OIS Swap Rate 3.0% 3.5% 4.5% Swap rates are given annually with annual compounding. Suppose in addition that each swap is on a notional of $1,000,000. Note that the payments column means that the 6-month and 1- year OIS swaps only have one payment (at maturity), while the 2-year OIS swap features two payments (one per year). For this vhole problem, assume you are using OIS discounting. (a) (10 points) What is the 2-year OIS zero rate (expressed with annual compounding)? Give your answer as a percentage to two decimal places (z.yz%). (b) (10 points) Still assuming you are using OIS discounting, suppose you observe a LIBOR-for- fixed swap that exchanges 6-month LIBOR against the swap rate for one year. The swap rate. for this contract is 4.0% per annum with semiannual compounding. In addition, suppose the current 6-month LIBOR rate is 3.5% with semiannual compounding. What is the 1-year LIBOR rate implied by the swap? Give your answer per annum with annual compounding as a percentage to two decimal places (z.yz%). You observe the following OIS swap rates: Payments Only at maturity Only at maturity Annually Maturity 6 mo. 1 yr. 2 yr. OIS Swap Rate 3.0% 3.5% 4.5% Swap rates are given annually with annual compounding. Suppose in addition that each swap is on a notional of $1,000,000. Note that the payments column means that the 6-month and 1- year OIS swaps only have one payment (at maturity), while the 2-year OIS swap features two payments (one per year). For this vhole problem, assume you are using OIS discounting. (a) (10 points) What is the 2-year OIS zero rate (expressed with annual compounding)? Give your answer as a percentage to two decimal places (z.yz%). (b) (10 points) Still assuming you are using OIS discounting, suppose you observe a LIBOR-for- fixed swap that exchanges 6-month LIBOR against the swap rate for one year. The swap rate. for this contract is 4.0% per annum with semiannual compounding. In addition, suppose the current 6-month LIBOR rate is 3.5% with semiannual compounding. What is the 1-year LIBOR rate implied by the swap? Give your answer per annum with annual compounding as a percentage to two decimal places (z.yz%).
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Answer rating: 100% (QA)
a To calculate the 2year OIS zero rate we need to use the OIS swap rates and OIS discounting The OIS ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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