Consider the equation

for the par swap rate under OIS discounting in Section 12.1.3. If the OIS-Libor spread is zero, show that this reduces to the classical equation D(0,T₀) – D (0, T_N) = Suppose that the OIS-Libor spread is a constant s, i.e.  Express the swap rate R^Δ_N in terms of the classical swap rate R_N and the spread s.

Section 12.1.3.

Transcribed Image Text:

M N Σ1₁ ƒ^(0, T-1, Tš )7**D(0,T*) = R^Σ₁ TiD(0, Ti)