Equation Check - R43 2.1 Forward Rate Model

CFA Level II Fixed Income
#1

Hi,

I am just going through FI. Despite the over-eager notation the forward rate model seems straightforward. But for equation 6 of the curriculum I don’t understand why it’s raised to the power of (T*/T). From re-arranging equation 4 I think this should be (1/T). And from solution 2 of example 2 this seems correct, because pricing a f(2X1) doesn’t require raising the right hand side to 2.

Could someone check, i don’t see this in the errata, so maybe i’m missing something obvious.

Cheers in advance!

#2

Bueller?

#3

Take a day off from studying.

#4

thanks Krok,… I work full time so that is about as funny as the comedy of Ray Romano frown

#5

The whole T*/T notation is very unconventional and confusing so ignore it. I am sure you understood spot-forward relationship.

P.S. Did you mean Matthew Broderick?