APPENDIX TO CHAPTER 2Swap, Spot, and Forward Rates
A2.1 CONTINUOUS COMPOUNDING
Equation (2.7) gives the proceeds of investing 
for 
periods at the rate 
, which is compounded 
times per year. By the definition of 
, there are 
periods over 
years. Therefore, with 
, (2.7) becomes,
Under continuous compounding, interest is paid every instant, so that the proceeds of an investment that is continuously compounded over 
years grows to the limit of Equation (A2.1) as approaches infinity. Taking ...
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