Forward Rate - Definition
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forward rate Interestratedynamics and consistentforward ratecurves, Bjrk, T., & Christensen, B. J. (1999). Interest rate dynamics and consistent forward rate curves.Mathematical Finance,9(4), 323-348. In this study, the authors consider as given an arbitragefree interest rate model M, and a parametrized family of forward rate curves G. They study the question as to when the given family G is consistent with the dynamics of the interest rate model M, in the sense that M actually will produce forward rate curves belonging to G. Spot rates,forwardrates and exchange market efficiency, Cornell, B. (1977). Spot rates, forward rates and exchange market efficiency.Journal of financial Economics,5(1), 55-65. This paper examines the relationship between forward exchange rates and subsequently observed spot rates. Fitting yield curves andforward ratecurves with maximum smoothness, Adams, K. J., & Van Deventer, D. R. (1994). Fitting yield curves and forward rate curves with maximum smoothness.Journal of Fixed Income,4(1), 52-62. Forward ratevolatilities, swapratevolatilities, and the implementation of the LIBOR market model, Hull, J. C., & White, A. (2000). Forward rate volatilities, swap rate volatilities, and the implementation of the LIBOR market model. This paper presents a number of new ideas concerned with the implementation of the LIBOR market model and its extensions. It develops and tests an analytic approximation for calculating the volatilities used by the market to price European swap options from the volatilities used to price interest rate caps. Testing the unbiasedforward ratehypothesis: Evidence on unit roots, co-integration, and stochastic coefficients, Barnhart, S. W., & Szakmary, A. C. (1991). Testing the unbiased forward rate hypothesis: Evidence on unit roots, co-integration, and stochastic coefficients.Journal of Financial and Quantitative Analysis,26(2), 245-267. In this paper, the authors demonstrate that the conflicting results found in the literature of tests of the unbiased forward rate hypothesis (UFRH) depend upon the econometric specification used as well as differences in the time period of estimation. Using an alternative error correction specification, the paper shows that the UFRH is resoundingly rejected for all currencies and that the coefficients in this specification exhibit temporal instability. The paper is concluded with an investigation into potential causes for the gross violation of the UFRH. Forwardand spot exchange rates, Fama, E. F. (1984). Forward and spot exchange rates.Journal of monetary economics,14(3), 319-338. This paper advances the notion that forward exchange rates have little if any power as forecasts of future spot exchange rates. Conditional on the hypothesis that the forward market is efficient or rational, this paper finds that both components of forward rates vary through time. Interestrateoption pricing with PoissonGaussianforward ratecurve processes, Shirakawa, H. (1991). Interest rate option pricing with PoissonGaussian forward rate curve processes.Mathematical Finance,1(4), 77-94. In this paper, the authors study a continuous trading bond model where the associated forward rate curve follows a multidimensional PoissonGaussian process. the bond market is complete, and the unique arbitragefree interest rate call option price is explicitly derived. Heterogeneous expectations and tests of efficiency in the yen/dollarforwardexchangeratemarket, Elliott, G., & Ito, T. (1999). Heterogeneous expectations and tests of efficiency in the yen/dollar forward exchange rate market.Journal of Monetary Economics,43(2), 435-456. This paper examines the efficiency of the forward yen/dollar market using micro survey data. Theforward rateas a predictor of the future spotrate--A stochastic coefficient approach, Chiang, T. C. (1988). The forward rate as a predictor of the future spot rate--A stochastic coefficient approach.Journal of Money, Credit and Banking,20(2), 212-232. This paper develops a stochastic coefficient model to examine the unbiased forward rate hypothesis for the period January 1974 to August 1983. An empirical comparison offorwardrateand spotratemodels for valuing interestrateoptions, Bhler, W., UhrigHomburg, M., Walter, U., & Weber, T. (1999). An empirical comparison of forwardrate and spotrate models for valuing interestrate options.The Journal of Finance,54(1), 269-305. This paper aims to investigate the question of which interestrate options valuation models are better suited to support the management of interestrate risk. The authors use the German market to test seven spotrate and forwardrate models with one and two factors for interestrate warrants for the period from 1990 to 1993. Findings are documented in the text.