- Joined
- 9/28/16
- Messages
- 1
- Points
- 11
Hi,
Most respected quant community of the universe.
I'm a 15 year old beginner and I was hoping to receive one simple doubt clarification. This is regarding pricing of derivatives using forward equations. I do have a question in hand to which I have been trying to find the answer of for over two weeks now and still cant reach the correct answer. I was hoping if I could receive some concept clarity.
Here is the question:
Compute the initial value of a forward-starting swap that begins at t=1, with maturity t=10 and a fixed rate of 4.5%. (The first payment then takes place at t=2 and the final payment takes place at t=11 as we are assuming, as usual, that payments take place in arrears.) You should assume a swap notional of 1 million and assume that you receive floating and pay fixed.)
I have herewith attached my excel worksheet.
forward swap
Cannot identify where im going wrong. i have my short rate, elementary pricing lattices all set up and verified. then i computed a forward price lattice with the {(rij-4.5%)/(1+rij)*(corresponding elemnetary price)} and then summed all values from 1 to 10, and multiplied by 1000000. The answer I get is wrong. It's been so discouraging as a beginner with no finance or computer science backgroudnd being hung up on this question for 2 weeks now.
Thanks a lot!
Ps: In my part of the world, I cannot really find a teacher to physically approach.
Most respected quant community of the universe.
I'm a 15 year old beginner and I was hoping to receive one simple doubt clarification. This is regarding pricing of derivatives using forward equations. I do have a question in hand to which I have been trying to find the answer of for over two weeks now and still cant reach the correct answer. I was hoping if I could receive some concept clarity.
Here is the question:
Compute the initial value of a forward-starting swap that begins at t=1, with maturity t=10 and a fixed rate of 4.5%. (The first payment then takes place at t=2 and the final payment takes place at t=11 as we are assuming, as usual, that payments take place in arrears.) You should assume a swap notional of 1 million and assume that you receive floating and pay fixed.)
I have herewith attached my excel worksheet.
forward swap
Cannot identify where im going wrong. i have my short rate, elementary pricing lattices all set up and verified. then i computed a forward price lattice with the {(rij-4.5%)/(1+rij)*(corresponding elemnetary price)} and then summed all values from 1 to 10, and multiplied by 1000000. The answer I get is wrong. It's been so discouraging as a beginner with no finance or computer science backgroudnd being hung up on this question for 2 weeks now.
Thanks a lot!
Ps: In my part of the world, I cannot really find a teacher to physically approach.
