forwards {bondAnalyst} R Documentation

## Calculates Yearly Forward Rates using the given Spot Rates.

### Description

Calculates Yearly Forward Rates using the given Spot Rates.

### Usage

forwards(spots, yrsFRbegins, yrsFRapplies, t, n)

### Arguments

 spots A vector. yrsFRbegins A number. yrsFRapplies A number. t A vector. n A number.

### Details

According to information provided by Frank J. Fabozzi (2008), the method forwards() is developed to calculate Forward Rates using the given Spot Rates. Here, spots is vector of given spot rates, yrsFRbegins is year in which Forward Rate begins (for example, a value of 1 would mean 1 year from now, and value of 2 would means two years from now), yrsFRapplies means number of years for which the Forward Rate Applies (for example, a value for 1 means for 1 year and yrsFRapplies value of 4 means for four years). So, yrsFRbegins=2 and yrsFRapplies=1 means computing implied Forward Rate of 2 years from now, for 1 year. This is also called as 1 year forward rate 2 years into future. Lastly, t is a vector of number of years ranging from 1 to any specified number of years for which the Spot Rates are available, and n is number of years under consideration. For understanding the value of output, it is to be noted that in the first example, an output value of 0.1404 means 1 year from now, for 1 year the implied forward rate works out to be 14.04 percent. In the second example, an output value of 0.2124 means 2 years from now for 1 year the implied forward rate works out to be 21.24 percent (this is also called as 1 year forward rate, 2 years into future).In the third example, an output value of 0.2748 means 3 years from now for 1 year the implied forward rate works out to be 27.48 percent (this is also called as 1 year forward rate, 3 years into future).

### Value

Input values to five arguments spots ,yrsFRbegins,yrsFRapplies, t and n.

### Author(s)

MaheshP Kumar, maheshparamjitkumar@gmail.com

### References

Fabozzi, F. J. (2008). Handbook of Finance: Financial Markets and Instruments. John Wiley & Sons.

### Examples

forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=1,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=2,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=3,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=4,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=5,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=6,yrsFRapplies=1,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=1,yrsFRapplies=4,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=3,yrsFRapplies=4,t=c(1:8),n=8)
forwards(spots=c(0.10,0.12,0.15,0.18,0.20,0.22,0.24,0.30),yrsFRbegins=5,yrsFRapplies=2,t=c(1:8),n=8)

[Package bondAnalyst version 1.0.1 Index]