Spot Rates, Forward Rates, and Yield-Curve Pricing
Free SOA Exam FM (Financial Mathematics) lesson in General Cash Flows, Portfolios, and Asset-Liability Management. 14 min read, ~2,163 words.
Spot rate is the yield on a zero maturing at: a cash flow at is discounted by. Bootstrap spot rates shortest-first: solve from a 1-year bond, then use it to solve from a 2-year bond, and so on. Forward rate:. The numerator's exponent is always the larger one. No-arbitrage lock-in...
Read the full lesson, free →
Worked examples, audio narration, and practice. No signup to read.
What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 5a
- 5b
- 5c
Browse all free Exam FM lessons or jump into free Exam FM practice questions.