Instantaneous spot rate

Discussion in 'CM2' started by Ijaa254, Sep 17, 2019.

  1. Ijaa254

    Ijaa254 Member

    Hi,
    Can someone kindly explain how the following instantaneous spot rate formula is arrived at:

    upload_2019-9-17_9-29-25.png

    Please also help with the instantaneous forward rate formula:

    upload_2019-9-17_11-22-28.png
     
    Last edited by a moderator: Sep 17, 2019
    Ijaa254, Sep 17, 2019
    #1
  2. Anna Bishop

    Anna Bishop ActEd Tutor Staff Member

    Hello

    I'm not convinced by that formula for the instantaneous spot rate in the Core Reading, not sure the notation is entirely accurate.

    I think the instantaneous forward rate formula is fine.

    I've had a go at explaining where the formulae for the instantaneous forward and spot rates come from in the attached. Hope it's useful, get back to me if you still have queries.

    Anna
     

    Attached Files:

    Last edited: Sep 17, 2019
    Anna Bishop, Sep 17, 2019
    #2
  3. Ijaa254

    Ijaa254 Member

    Thanks. The second formula is okay. The first may be inaccurate.
     
    Ijaa254, Sep 18, 2019
    #3
  4. Anna Bishop

    Anna Bishop ActEd Tutor Staff Member

    Yes I agree.
     
    Anna Bishop, Sep 18, 2019
    #4

Share This Page