You are given the following quotes for liquid FRAs paid in arrears. Assume that all time intervals are measured in months of 30 days.
|
Term |
Bid/Ask |
|
3 × 6 |
4.5-1.6 |
|
6 × 9 |
4.7-1.8 |
|
9 ×12 |
5.0-5.1 |
|
12 × 15 |
5.5-5.7 |
|
15 × 18 |
6.1-6.3 |
You also know that the current 3-month Libor rate is 4%.
(a) Calculate the discount bond prices B(t0, ti), where ti =6,9,12,15, and 18 months.
(b) Calculate the yield curve for maturities 0 to 18 months.
(c) Calculate the swap curve for the same maturities.
(d) Are the two curves different?
(e) Calculate the par yield curve.
(f) Calculate the zero-coupon yield curve.