Fixed Income: Infer discount factors, spot, forwards and par rates from swap rate curve (FRM T4-25)

[@cwen5456]

you made a mistake at 9:52 where it should be [1+r1/2]ˆ1*2 for compounding at 1 year spot rate semiannually.

[@tedsung5951]

Can you explain where you get the discount factor for the 0.5 term? I'm assuming that in 0.5 years, I get back par plus a coupon of 0.00705/2. so ( 1 + 0.00705/2 ) * d(0.5) should equal par (1) and solving for d(0.5), I get 0.99648738. This doesn't match the .996489 in the table. What am I missing here? Thanks.

[@mansiswami2548]

I got the same

[@tedsung5951]

@@mansiswami2548 I just looked at my notes at it seems the spreadsheet is truncating values and then calculating with the truncated values. If you use all the decimals needed, it works

[@kirillpenzin6077]

Many thanks. You use a bond notion while infering the par rates. What is par rate for the swap? Do you have a video with the similar calculations, but in multicurve framework?

[@14terrorblade]

Thanks man, your videos are very helpful, do you think that some day you can explain the diebold li model?

[@kareenar8749]

Is it also true that if we did a geometric average of the forward rates, we would get the swap rates?

[@bionicturtle]

I don't think so (never heard that). I just tried it with the swap rate video set where forward curve is {0.40%, 1.60%, 2.51%, 3.51%, 4.02%) and 5-year swap rate (par yield) is 2.36%, but the corresponding geometric average is 2.40%

[@sri3utube]

Not explained clearly