Quick question on the spot_discount_forward editgrid

[sridhar]

http://www.bionicturtle.com/premium/editgrid/2008_frm_fixed_income_spot_vs_foward_vs_discount/

I refer to the above. I get the Tuckman-inspired calculations. You also included the Hull continous compounding calculations to compute the 6-month fwd rate. Can you show me which learning outcome or chapter in Hull's book talks about the underlying formula?

--sridhar

 

[David Harper CFA FRM]

Hi sridhar,

To our other thread, this is an example of where I augmented the XLS based on forum questions. Originally, I only had the Tuckman.
Then John raised this point.

So I added Hull's approach below Tuckman's.
Mostly to illustrate, yet another example of where the concepts are *identical,* only the compound frequency changes! IMO, it is nice to cross this hurdle, so see that compound frequency is merely an choice of units, so to speak, that can be translated back and forth.

So, it's from Hull 4.6 but that is not assigned. The Tuckman is assigned; Tuckman is alwasy semi-annual compounding.

David