Pricing of Forward Rate Agreements Analytical finance ii Michael Aussieker, Oliver Grace
Step One • Calculate the discount factors:
Step Two • Calculate the Zero Coupon Rates:
The Nelson–Siegel–Svenssonmodel where are parameters calculated via least squares or a solver such as the one found in Microsoft Excel.
Calculate Parameters Used R language to calculate parameters below:
Step Three • Calculate Zero Rate Curve for EUR 3M, EUR 6M, EUR OIS 3M, EUR OIS 6M with NSS • Find 3x6 etc Forward Rates from EUR 3M and 3x9 etc Rates from EUR 6M • Do same for EUR OIS 3M and EUR OIS 6M curves