During this class we learned what a zero-coupon rate is and how to calculate discount factors (have a look at the Excel file).
We also reviewed how to calculate forward discount factors and forward rates avoiding potential arbitrage opportunities. A forward rate is a rate to be applied to a forward starting loan/deposit. The idea behind this concept is that if I do a 1) 12m deposit or 2) a 6m deposit and I reinvest the proceeds in a new forward starting 6m deposit, the outcome should be the same.
Additionally, we had a look at how FRAs (Forward Rate Agreements) and Eurodollar Futures work.
The presentation can be found here.
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