RATES Function

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RATES Function

calculates a column vector of interest rates converted from one base to another

the RATES function returns an n x 1 vector of interest rates converted
from one base to another.

rates: is an n x 1 column vector of rates.
Elements should be positive.
oldfreq: is a scalar which represents the old base.
If positive, it represents discrete compounding
as the reciprocal of the number of compoundings.
If zero, it represents continuous compounding.
If -1, it represents discount factors.
No other negative values are allowed
newfreq: is a scalar which represents the new base.
If positive, it represents discrete compounding
as the reciprocal of the number of compoundings.
If zero, it represents continuous compounding.
If -1, it represents per-period discount factors.
No other negative values are allowed

Let D(t) be the discount function, which is the present value of a unit amount to be received t periods from now. The discount function can be expressed in three different ways:
with per-unit-time-period discount factors d_t:

D(t) = d_t^t

with continuous compunding:

D(t) = e^{-r_t t}

with discrete compunding:

D(t) = (1+fr)^-(t/f)

where f > 0 is the frequency, the reciprocal of the number of compoundings per unit time period. The RATES function converts between these three representations.

Example proc iml;
rates=do(.1,.3,.1);
oldfreq=0;
newfreq=0;
rates2=T(rates);
rates=rates(rates2,oldfreq,newfreq);
print rates;
quit;

RATES
0.1
0.2
0.3

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