More Applications for the Implied Spot and Forward Curves
Implied spot and forward rates need to be useful in making financial decisions to qualify as information and not just create more data. Fortunately, they really can be quite informative. An obvious application for bootstrapping the implied spot curve is to get the zero-coupon rates needed to derive the implied forward curve. That is, the implied spot curve can be just an intermediate step to get to get the information we need to help make a maturity choice decision.
FIGURE 5.2 Summary of Implied Forward Rate Calculations
Figure 5.2 summarizes the various paths to the implied forward rate ...
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