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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Introduction 13
is increase in purchasing power is termed as the real interest rate, and the Fisher eect relates the real
interest rate and the nominal interest rate as:
Real interest rate =
1+ Nominal rate
1+ Expected inflation rate
−−1
e Fisher eect is usually expressed as an approximate form as:
Real interest rate = Nominal interest rate – Expected ination rate
In nancial markets, the real interest rate is determined on the basis of supply and demand; the nominal
rate is then calculated from this real rate as:
Nominal interest rate = Real interest rate + Expected ination rate
Note that the interest and ination rates are for the investment ...
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Publisher Resources

ISBN: 9781299447547Publisher Website