Forward rate

CFA Level I Fixed Income
#1

Dear all,

What does 2 y 1 y denotes?

i) 2 year forward rate, 1 year from now

ii) 1 year forward rate, 2 years from now

From Schweser’s Notes, it seems that 2y1y denotes (ii) and;

from CFAI text, it seems that 2y1y denotes (i).

Can anyone help?

Thank you,

Cheers,

Ernest

#2

It’s the two year forward rate, starting one year from now - option (I)

if in doubt - learn the CFAI definition, cos that’s what we are getting tested on…

#3

Actually I just looked up the text again (CFAI) and it is the other way round.

The first number is the length of the forward period in years from today, and the second number refers to the tenor of the underlying.

Page 433 is what I’m referring to.

#4

Thanks for the help, pal! :slight_smile:

So 2y1y implies a 2-year forward rate, 1 year from now, right?

Ernest

#5

It is :

i) 2 year forward rate, 1 year from now

Go with the CFAI text.

thanks

#6

Thanks to both, CFAStart2014 and edupristine!