Forward Rates
Rates implied today for borrowing over a future interval.
Build the mental model first.
A forward is the break-even rate between discounting directly and rolling through an intermediate date.
Rates implied today for borrowing over a future interval.
Now make it exact.
Notation and units
Decimal rates and volatilities, year-fraction time and continuous compounding unless stated otherwise.
Every model has a price.
Educational conventions are stated explicitly and may simplify market quotation or settlement details.
Rates are continuously compounded unless the section says otherwise.
Inputs are deterministic in the base model.
“An unstated convention is a future reconciliation break.”— THEQUANTBATEMAN
Why a quant cares.
FRA valuation, swap cashflows and monetary-policy expectations under a chosen curve.
The hedge has opinions.
Start with the quote convention, then ask which IR risk survives the hedge. A number without its convention is merely well-dressed ambiguity.
Ask Bateman about this model →