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Implied Rate

What is an 'Implied Rate'

An implied rate is an interest rate that is determined by the difference between the spot rate and the forward/futures rate. The degree of relative costliness of a future rate can be assessed by comparing the implied rate with the spot rate.

Calculated as:

Explaining 'Implied Rate'

For example, if the present spot rate of LIBOR is 5% and the forward rate for LIBOR is 6%, the implied rate is 1%. This situation merits the impression that the future rate for borrowing will be more expensive.


Further Reading


Are implied volatilities more informative? The Brazilian real exchange rate case
www.tandfonline.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capitalPE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital
meridian.allenpress.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Implied interest ratesImplied interest rates
www.jstor.org [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

The economics of options-implied inflation probability density functionsThe economics of options-implied inflation probability density functions
www.sciencedirect.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

The calculation of implied variances from the Black-Scholes model: A noteThe calculation of implied variances from the Black-Scholes model: A note
www.jstor.org [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Forecasting exchange rate volatility: GARCH models versus implied volatility forecastsForecasting exchange rate volatility: GARCH models versus implied volatility forecasts
link.springer.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Uncertainty and implied variance bounds in long-memory models of the interest rate term structureUncertainty and implied variance bounds in long-memory models of the interest rate term structure
link.springer.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Stochastic implied trees: Arbitrage pricing with stochastic term and strike structure of volatilityStochastic implied trees: Arbitrage pricing with stochastic term and strike structure of volatility
www.worldscientific.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Two unconditionally implied parameters and volatility smiles and skewsTwo unconditionally implied parameters and volatility smiles and skews
www.tandfonline.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …

Implied discount rate and payback threshold of energy efficiency investment in the industrial sectorImplied discount rate and payback threshold of energy efficiency investment in the industrial sector
www.tandfonline.com [PDF]
This article examines the relation between dollar–real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option that is not present in …



Q&A About Implied Rate


What are some other ways to express an interest rate in finance?

Some other ways to express an interest rate in finance include nominal, simple, effective, annualized, and compounded rates.

Why do you need to calculate implied rates?

You need to calculate implied rates because they are important in determining borrowing costs for companies and individuals.

How would you use this information?

This information could be used when making decisions about whether or not to borrow money from a bank, how much money to borrow, and when to repay your loan.

What does implied rate mean?

Implied rate means the interest rate that would be paid on a loan if it were not for compounding.

How do you calculate an implied monthly percentage yield?

You can calculate this by dividing the amount of money borrowed by the principal amount and multiplying it by 12.

How can you assess the relative costliness of a future rate?

You can assess the relative costliness of a future rate by comparing it with the spot rate.

What is an implied rate?

An implied rate is an interest rate that is determined by the difference between the spot and forward rates.

How do you calculate an implied annual percentage yield?

You can calculate this by dividing the amount of money borrowed by the principal amount and multiplying it by 100%.

What does calculating imply as mean?

Calculating implies means to determine or estimate.

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