Interpolation of LIBOR rate
 

Hi guys,

I want to learn how to do interpolation calculationg using Excel.

Interpolation start date is 3/16/06
Interpolation end date is 6/15/06

2M Libor rate at 05/16/06 is 4.82625
3M Libor rate at 06/16/06 is 4.91688

I need to find out LIBOR rate at 6/15/06
(The rate that I received from the counterparty is 4.91396)

Interpolation of LIBOR rate
 

General process: Determine the number of periods (days). In this case it's 31.
Determine total change between start rate and end rate (.09063).
Determine average change per period: .09063/31
that gives you an average change per period of .002924
You want the rate at the 30th day beyond the early date, so
..002924 * 30 = .087706 change in those 30 days
add that back to the original base value: 4.82625+.087706 = 4.913956

Now, in Excel:
Cell Value/Formula
A1 5/16/06
A2 6/16/06
A3 6/15/06
A2 4.82625
B2 4.91688
in any other cell
=(((B2-A2)/(B1-A1))*(C1-A1))+A2
gives you the answer.


"Lawrence" wrote:

Hi guys,

I want to learn how to do interpolation calculationg using Excel.

Interpolation start date is 3/16/06
Interpolation end date is 6/15/06

2M Libor rate at 05/16/06 is 4.82625
3M Libor rate at 06/16/06 is 4.91688

I need to find out LIBOR rate at 6/15/06
(The rate that I received from the counterparty is 4.91396)