Spot interest rate

Spot interest rate

Interest rate fixed today on a loan that is made today. Related: Forward interest rates.

Spot Interest Rate

The interest rate for loans and debt securities issued at a given time. The advantage of borrowing at the spot interest rate is the fact that it is a known quantity and one can amortize the loan accordingly. The risk of the spot interest rate is that interest rates may rise or fall in the future to the disadvantage of one of the parties to a contract. Some investors speculate on the difference between a spot interest rate and a forward interest rate.
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Furthermore, our study extends Amin and Morton (1994) and Klassen, Dressien and Pelsser (1999) by considering that the volatility structure depends on the level of the spot interest rate.
In this case the volatility structure becomes deterministic and the spot interest rate becomes the only state variable.
Pelsser, 2000, "Forward versus Spot Interest Rate Models of the Term Structure: An Empirical Comparison", The Journal of Derivatives 7, 9-21.
Having analyzed the length of the relationship between lagged forward rates and the spot interest rate, we can explore the direction of the influence on the relationship between the Treasury and swap yield curves.
For this segment of the curve, the hedging of options exposures to the three-to-five-year forward rate and the five-to-ten-year forward rate could have an effect on the five-year spot interest rate.
The interest rate with the shortest maturity is commonly called the spot interest rate, r.
When the spot interest rate r is above or below the long-term spot interest rate, [r.
The model assumes that the only uncertainty affecting the value of the project is the term structure movement due to the evolution of the spot interest rate.
The term structure of interest rates or zero-coupon yield curve characterizes relation between spot interest rates in the economy and the term to maturity of default-free fixed income securities in the market.