Real-World Interest Rate Distribution: End 2007 - 1-year ahead interest rate tails: initial analysis and discussion
Document ID: 2008-333
Published on: 1st January 2008
Author: John Hibbert & Martin Skrk
This note sets out 1-year-ahead targets for movements in swap rates over the period to year-end 2008 conditional on the market environment at year-end 2007.
These estimates are subject to a high degree of uncertainty which increases as look further into the tails of the future distribution. In this report we provide estimates using two simple distributional assumptions (Normality and log Normality) with an estimate for forward-looking volatility fixed in line with market option prices.
