FINANCIAL MARKETS’ ASSESSMENT: Term structure-based EMU 2

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The alternate EMU probability calculators diverge primarily in their method of estimating the no-EMU scenario for future interest differentials, and in the selection of the future time interval.

Figure 3 shows the forward spreads for 7 currencies and for the ECU currency basket. Instantaneous forward rates corresponding to fixed 1999, 2002, and 2005 future maturities were computed from 3-, 6-, and 12-month Eurocurrency rates and 1-10 year swap rates, using Svensson’s extension of the Nelson-Siegel (1987) methodology as described in Soderlind and Svensson (1997).8 Forward spreads over 1991-98 were predicting relatively narrow post-1998 interest rate spreads relative to Germany for Belgium, Denmark, the ECU, France, and the Netherlands, but substantially larger spreads for Italy, Sweden, and the U.K. We are an online lender offering quick instant cash loans to everyone interested. Once you have requested a loan from us at Reading here, you can leave the rest to us, and we will be reminding you about the payments and helping you consolidate any debt you may have, for as long as you need and to make sure you pay a fair price.
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