The Spot Curve and Forward Curve Explained In 5 Minutes

[@RyanOConnellCFA]

💾 Download Free Excel File: ► Grab the file from this video here: ryanoconnellfinance.com/product/spot-curve-and-forward-curve-excel-workbook/ 📈 Need help with a 🎓 Tutor With Me: 1-On-1 Video Call Sessions Available ► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/

[@bp56789]

I appreciate your videos, Ryan. I’m not studying for a CFA, I just like to learn about what I don’t know. Thanks.

[@RyanOConnellCFA]

Thanks for the comment bud! I'm happy to see someone is casually interested in the nuts and bolts of finance

[@pizzaandmeth4538]

How convenient that you upload this as soon as i reached the yield curve part in level 1 fixed income

[@RyanOConnellCFA]

Hahaha now that is great timing! Your username made me laugh by the way😂

[@pizzaandmeth4538]

@@RyanOConnellCFA hah yes,it's a classic .

[@Catalina-jx2mu]

This helps tremendously, many thanks!

[@RyanOConnellCFA]

Glad it helped!

[@adiparikh3080]

Excellent video - I'm in a 300-level Fixed Income course and this really helped put conceptual ideas into practical terms. Thank you!

[@RyanOConnellCFA]

Really appreciate the feedback Adi! I'm glad it was helpful for you. Check out my channel, there are tons of Fixed Income videos that should be helpful for your course

[@BillcpSilva]

Thank you for the video Ryan, you saved me a lot of time.

[@RyanOConnellCFA]

My pleasure Bill!

[@keenanpulz880]

ive been waiting forever for this one to drop

[@ipsitadutta3762]

Thank you for the video. What are the difficulties in estimating a forward yield curve.

[@RyanOConnellCFA]

Hi @ipsitadutta3762, thanks for your question! Estimating a forward yield curve can be challenging due to the need for accurate assumptions about future interest rates, which are inherently uncertain. Another difficulty lies in the availability and reliability of market data needed to construct these curves. However, a practical approach often used in finance is to derive the forward curve from the current market-implied yield curve, which reflects the collective market expectations about future rates. This method provides a basis that adjusts with market sentiment, making it a dynamic and commonly used tool in financial analysis.

[@marvinyorke3463]

Great illustration!

[@RyanOConnellCFA]

Thank you! Cheers!

[@raks291]

At 1:25, should we be saying compounded for two years rather than discounted ?

[@RyanOConnellCFA]

In my opinion, discounted and compounded are synonymous so you can use whichever phrasing helps you to understand the concept

[@AYW5]

Thank you sir. Especially for the free gift.

[@RyanOConnellCFA]

It is my pleasure Alexander!

[@BurleyKTFO]

Thanks for the spreadsheet that was brilliant

[@RyanOConnellCFA]

Glad it was helpful!

[@SanjibRay-o3g]

A great way to explain ....thanks for the videos

[@msppg769]

Thank you for your brilliant video! I appreciate it!

[@RyanOConnellCFA]

My pleasure, glad you enjoyed it!

[@joaogabriel6045]

1. this forward rate agreement for 1y you've mentioned is basicly how much a bond should return in 1y in order to achieve the spot rate when the last year returned the last spot return? ex: 2% in the first year but 6.04% in the second so the total return would be 4% 2. also, where is this used for? thank you so much for the class!

[@RyanOConnellCFA]

The 6.04% referenced @1:45 is the 1 year forward rate, starting 1 year from today. This amount must make us indifferent to lending at the 2 year rate, or lending at the 1 year rate and then the 1 year forward rate starting one year from now. If you are struggling to understand this concept, I highly recommend you watch this video here: kzbin.info/www/bejne/l4DaaJKmeq2JkK8

[@Fj8282haha]

Thx for elevate humanity’s intelligent

[@RyanOConnellCFA]

Haha it is my pleasure!

[@manik8550]

Any other way to get the file? It won't let me download it unfortunately.

[@anassb943]

love the work, keep it up!

[@RyanOConnellCFA]

Thanks, will do!

[@ShaileshChander-g2d]

Excellent video

[@RyanOConnellCFA]

Thank you very much!

[@urbanrapfms]

Spot rates in this case would be equal to the YTM?

[@neerajagrawal5654]

Hi Ryan your videos have been really helpful to me in understanding some of the tedious concepts , I just wanted to point that when you said a 1 year forward rate equals to a spot rate implying a a 1 year forward rate 0 years from now i.e. f(0,1) , but wouldn't it theoretically just be a spot rate because a F(0,1) does not exist and forward rate are quoted starting from [ (1,1),(2,1).......(n,1)] , and the F(1,1) would be 6.02.

[@RyanOConnellCFA]

Hey Neeraj, you are right that it is unconventional to say a one year forward rate starting today. This is exactly the same thing as the one year spot rate. I can see why that would be confusing

[@joao.grandizoli]

Man, thanks for the video. But if I want a foward for 6 months or a foward for Compounding m periods or even a Continuous compounding. How can I do?

[@RyanOConnellCFA]

Absolutely, I appreciate your question! To find a 6-month forward rate, you would typically interpolate between the surrounding points on the spot curve. For compounding over "m" periods, you'd use the formula for compound interest, which is F=P×(1+r/n)^(n×t), where "r" is the annual interest rate, "n" is the number of compounding periods per year, and "t" is the time in years. For continuous compounding, you'd use the formula F=P×e^(r×t), where "e" is the base of the natural logarithm, around 2.71828. I hope that helps. I have a very detailed video on continuous compounding here: kzbin.info/www/bejne/nKW7iWekj69nps0

[@joao.grandizoli]

@@RyanOConnellCFA Thankssss

[@odirilegoitseonemathe6138]

That was nice

[@JPtheKid15]

GOAT

[@RyanOConnellCFA]

Much appreciated Jack!

[@Abhismash]

Ryan I guess you resemble Tom Cruise in some way

[@RyanOConnellCFA]

Now that is one of the best compliments I've ever been given!