Mastering Python for Finance - Second Edition

Forward rates

An investor who plans to invest at a later time may be curious to know what the future interest rate will look like, as implied by today's term structure of interest rates. For example, you might ask, What is the one-year spot rate one year from now? To answer this question, you can calculate forward rates for the period between T₁ and T₂ using this formula:

Here, r₁ and r₂ are the continuously-compounded annual interest rates at time periods T₁ and T₂, respectively.

The following ForwardRates class helps us generate a list of forward rates from a list of spot rates:

class ForwardRates(object):    def __init__(self): self.forward_rates ...