1. Cash Flow Engine Reference Guide
  2. Transfer Pricing Option Costs
  3. Overview of Transfer Pricing Option Costs
  4. Calculate Forward Rates

10.1.5 Calculate Forward Rates

The cubic spline interpolation routine first calculates smoothed continuously compounded zero-coupon yields Y(j) with maturity equal to the end of month j. The formula for the one-month annually compounded forward rate spanning month j+1 is:

Equation 7

Figure 10-8 Equation 7


This image displays the Equation 7.

Description of the Transfer Pricing Option Cost Equation 7 follows: