4 Show that the swap rate for a standard swap with level notional amount is the same as the at-par yield rate for a bond with same time to maturity as the length of the swap. At-par yield was defined in Chapter 6 as coupon rate r at which a bond would have a yield to maturity of r under the current term structure.
4 Show that the swap rate for a standard swap with level notional amount is the same as the at-par yield rate for a bond with same time to maturity as the length of the swap. At-par yield was defined in Chapter 6 as coupon rate r at which a bond would have a yield to maturity of r under the current term structure.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please use actuarial science way to solve this problem. Thank you so much.
Show that the swap rate for a standard swap with level notional amount is the same as the at-par yield rate for a bond with same time to maturity as the length of the swap. At-par yield was defined in Chapter 6 as coupon rate r at which a bond would have a yield to maturity of r under the current term structure.
Transcribed Image Text:Show that the swap rate for a standard swap with level notional
amount is the same as the at-par yield rate for a bond with same
time to maturity as the length of the swap. At-par yield was
defined in Chapter 6 as coupon rate r at which a bond would
have a yield to maturity ofr under the current term structure.
8.4
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