Derive the 8-quarter dollar interest swap rate from 8-quarter euro in- terest swap rate (that was...
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Derive the 8-quarter dollar interest swap rate from 8-quarter euro in- terest swap rate (that was obtained from problem 8) by using equation (8.9) of the textbook or the formula in page 34 in the slide. Equiv- alently, we can consider the following situation. Suppose we want to swap a euro-denominated coupon bond with a par value of 1 Euro and 0.94572% coupon rate (which is same as the 8-quarter euro swap rate in question 8) for a dollar-denominated coupon bond with $0.9 par value. Then, the question is to find the coupon rate of the Dollar- bond. Quarter Oil forward price Gas swap price Zero-coupon bond price Euro-denominated zero-coupon bond price Euro forward price ($/ €) 1 21 2 3 4 5 21.1 20.8 20.5 20.2 2.2500 2.4236 2.3503 2.2404 2.2326 2.2753 0.9852 0.9701 0.9546 0.9388 In 0.9056 0.9115 0.9178 0.9244 20 0.9231 0.9075 7 8 19.8 19.9 2.2583 2.2044 0.8919 0.8763 0.9913 0.9825 0.9735 0.9643 0.9551 0.9459 0.9367 0.9274 0.9312 0.9381 0.9452 0.9524 Figure 1: Table for oil forward prices, Gas swap price, Zero-coupon bond price, Euro-denominated zero-coupon bond price, and Euro forward price. Derive the 8-quarter dollar interest swap rate from 8-quarter euro in- terest swap rate (that was obtained from problem 8) by using equation (8.9) of the textbook or the formula in page 34 in the slide. Equiv- alently, we can consider the following situation. Suppose we want to swap a euro-denominated coupon bond with a par value of 1 Euro and 0.94572% coupon rate (which is same as the 8-quarter euro swap rate in question 8) for a dollar-denominated coupon bond with $0.9 par value. Then, the question is to find the coupon rate of the Dollar- bond. Quarter Oil forward price Gas swap price Zero-coupon bond price Euro-denominated zero-coupon bond price Euro forward price ($/ €) 1 21 2 3 4 5 21.1 20.8 20.5 20.2 2.2500 2.4236 2.3503 2.2404 2.2326 2.2753 0.9852 0.9701 0.9546 0.9388 In 0.9056 0.9115 0.9178 0.9244 20 0.9231 0.9075 7 8 19.8 19.9 2.2583 2.2044 0.8919 0.8763 0.9913 0.9825 0.9735 0.9643 0.9551 0.9459 0.9367 0.9274 0.9312 0.9381 0.9452 0.9524 Figure 1: Table for oil forward prices, Gas swap price, Zero-coupon bond price, Euro-denominated zero-coupon bond price, and Euro forward price.
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