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Linear Interpolation ISDA

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137 views1 page

Linear Interpolation ISDA

bla

Uploaded by

Muchlis Scumacher D' Bulkibad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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ISDA

This spreadsheet has been developed for educational use only.


Example: Determining an unknown rate using linear interpolation
Enter data in shaded cells
Description
1M Libor (R1)
2M Libor (R2)
Payment date

Fixing date
6/27/2007
6/27/2007

Maturity
7/30/2007
8/29/2007
8/14/2007

Rate
5.32000%
5.34000%

Days
33
63
48

Libor source: British Bankers Association

Given:
Earlier known rate
Later known rate
Maturity of R1
Maturity of R2
Maturity of unknown rate

R1
R2
T1
T2
Tn

5.32000%
5.34000%
33
63
48

Note: Dates must be adjusted according to business day conventions


applicable to rate source (see below).

Interpolated rate
Formula 1
SLOPE = (R2-R1)/(T2-T1)
Rn = R1 + SLOPE*(Tn-T1)

0.00067%
5.33000%

Formula 2
(Tn - T1)
(T2 - Tn)
T2-T1
Rn = ((R1*(T2-Tn))+(R2*(Tn-T1)))/(T2-T1)
Both formulas should always give same calculation
Click here for market conventions pertaining to BBA Libor
Click here for market conventions pertaining to Euribor
Click here for Euribor business day conventions
Please address comments on this spreadsheet to:
David Mengle, Head of Research
[email protected]

15
15
30
5.3300%

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