Question: What is the relationship between forward rates and the markets expectation of future short rates? Explain in the context of both the expectations and liquidity
What is the relationship between forward rates and the market’s expectation of future short rates? Explain in the context of both the expectations and liquidity preference theories of the term structure of interest rates.
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In general the forward rate can be viewed as the sum of the markets expectation of the future short ... View full answer
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