Forward interest rate

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Forward interest rate

Interest rate fixed today on a loan to be made at some future date.

Forward Interest Rate

An interest rate to which a borrower and lender agree for a loan to be made in the future. According to the unbiased expectations hypothesis, forward interest rates predict spot interest rates at the time the loan is actually made, but many analysts dispute whether this is true.
References in periodicals archive ?
Sterling forward interest rates, which had almost completely priced in a cut on Thursday, shifted briefly to remove any chance of rates going lower than 0.
This is because one can observe forward interest rates in the market, but one cannot directly observe the expected inflation rates.
The rise in long-term rates has been so pronounced that it has pulled the front end of the yield and swap curve higher with it, and forward interest rates for late 2014 have risen sharply, to the extent that they are more or less pricing-in a policy move.
In addition to the decomposition of nominal interest rates described above, we can also decompose term interest rates into a series of shorter spot and implied forward interest rates.
To choose between these hypotheses, we examine how monetary policy surprises affect daily traded commodity prices, term interest rates, and forward interest rates.
Our strategy is to take as a basis the forward interest rates implied by the current spot treasury curve.
8) The calculation of forward interest rates is based on a parametric method developed by Svensson (1995).
By comparing implied forward interest rates, which are obtained from zero-coupon yield curves and the euro area, C & R are able to deduce the markets expectations for Hungary's euro conversion date.
The most important ingredient of the HJM term structure models is the choice of a volatility structure for forward interest rates.
The authors show that these results also are matched by the times-series behavior of far-ahead forward interest rates and inflation compensation over this period.
To judge from implicit forward interest rates, market operators are expecting an increase in the repo rate early in 2006 (see Diagram 65).
A dealer's portfolio of caps (floors) can therefore be thought of as a book of call (put) options on all six-month forward interest rates along the entire yield curve (out to the maturity of the longest maturity contract, which can be as long as ten years).

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