Introduction

MathFinance Interest Rate Library builds a solid framework for the Interest Rate Market covering products like Forward Rate Agreements (FRAs), Interest Rate Swaps (IRSs, both generic and forward started), Interest Rate Caps and Floors.

$\mbox{Interest Rate}\neq const$

We start with a simple consideration of the fact that in the real market interest rate is not a constant value. Moreover, it is not a deterministic value either. What it is is just a stochastic process in general.

Unpredictable behavior is always unwanted. People need guarantee! The natural questions would be

• ''Can I fix now an interest rate for some period in future?''
  FRA is exactly what you need! (see Bootstrapping Interest Rate Term Structure)
  
  
• "Can I invest my money for the fixed rate comparable somehow with the floating one?"
  This is the idea behind the Swap. (see Swaps)
  
  
• "How to protect my investments/loans against future interest rate fall/rise?"
  Take a look at Cap/Floor. (see Caps and Floors)