Martinghoul
Senior member
- Messages
- 2,691
- Likes
- 276
Decompound, get the discount factors and you should get your answer.
Thanks for the quick reply but what im confused about is:
if i convert the swap rate to cc...is that the 2 year spot rate??
Martinghoul
Senior member
- Messages
- 2,691
- Likes
- 276
Yes, as far as I can tell. Although I am not sure what you mean by "find the spot rate for year 2". Is it supposed to say "find the 2y spot rate"?
Martinghoul
Senior member
- Messages
- 2,691
- Likes
- 276
I guess so, although I haven't done the calculation.
Could you please explain why the swap rate can be also be the spot rate?
Martinghoul
Senior member
- Messages
- 2,691
- Likes
- 276
"Spot" just means that the rate starts on the "spot" date. This means that a swap rate can be spot, as well as fwd. Conversely, spot rate doesn't necessarily have to refer to "swap". For example, simple bond yield is a "spot rate". Swap is just the particular instrument, whereas "spot" and "fwd" denote the instrument's effective date.
Can someone confirm from the above question, whether i can use swap as the 2 year spot
I thought the swap rate is the fixed rate which make the value of a swap = 0
Martinghoul
Senior member
- Messages
- 2,691
- Likes
- 276
Dude(tte), I have responded to your question already. The 2nd swap rate is "a spot rate", but it may not be "the spot rate" you're looking for. To understand if it's the right rate you need to reread the problem and/or provide more context.