Today is November 3, 2008, and the 3-month LIBOR and (interpolated) swap rates are as in Table
Question:
(a) Obtain the LIBOR yield curve from the swap rates.7
(b) Let σ be the historical volatility of 3-month LIBOR rates (historical data are available on the Web site of the British Bankers Association at www.BBA.org.uk) Fit the Ho-Lee model to the LIBOR yield curve.
(c) Plot the resulting θt and discuss its relation with the forward curve.
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a In order to obtain the LIBOR yield curve from the swap rates presented i Obtain the quar...View the full answer
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ISBN: 978-0470109106
1st edition
Authors: Pietro Veronesi
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