Difficulty: Hard
Category: Brainteasers
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: forward-rate-agreement, interest-rates, quantitative-finance, arbitrage
You are a trader evaluating a Forward Rate Agreement (FRA). The current spot rate for a 1-year maturity is 2% and the current spot rate for a 2-year maturity is 3%. Assume annual compounding. What is the approximate 1-year forward rate, 1 year from today (the 1y-1y forward rate)? Remember to think about how forward rates are derived from spot rates and the relationship between them.
Practice this hard trader interview question on MyntBit - the all-in-one quant learning platform with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.