Forward yield: Difference between revisions
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imported>Doug Williamson (Link with Forward rate agreement page and add example.) |
imported>Doug Williamson (Link with Par yield page.) |
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== See also == | == See also == | ||
* [[Yield curve]] | * [[Yield curve]] | ||
* [[Par yield]] | |||
* [[Zero coupon yield]] | * [[Zero coupon yield]] | ||
* [[Forward rate agreement]] | * [[Forward rate agreement]] | ||
Revision as of 12:21, 11 November 2015
The rate of return in the market today for a notional or actual deposit or borrowing:
- Starting at a fixed future date; and
- Ending on a later fixed future date.
Example
The forward yield for the maturity 2-3 periods is 3% per period.
This means that a deposit of £1,000,000 at Time 2 periods would return:
£1,000,000 x 1.03
= £1,030,000 at Time 3 periods.
A common application of forward yields is the pricing of forward rate agreements.
The forward yield is also known as the Forward rate or (sometimes) the Forward forward rate.
(The Forward forward rate is technically slightly different.)
