Question: Using the relation between the discount factor and Libors: show that the fair coupon ST for the fixed leg of a swap paying ST (Ti1,

Using the relation between the discount factor and Libors:

1 P(To, T;) = II 1+Li-17(Ti-1, Ti) i=1,j

show that the fair coupon ST for the fixed leg of a swap paying ST τ(Ti−1, Ti) at each time Ti, for 1

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where

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(This is generally referred to as the swap rate for the swap of the corresponding maturity and tenor.)

1 P(To, T;) = II 1+Li-17(Ti-1, Ti) i=1,j

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