## zero rate

The

**is a particular type of interest rate that pertains to a special type of lending/borrowing contracts represented in Deriscope by the tradable Zero Bond.**

*zero rate*In a Zero Bond one party receives a fixed amount of cash at some preagreed future time (maturity) from the other party.

The related

**cannot be defined without the additional specification of the following 3 conventions, that define how the**

*zero rate***is calculated:**

*zero rate***The Frequency that defines how often the rate generates interest income by being applied on the capital amount applicable at the time when the rate is applied.**

*1)***The Compounding that defines how the capital amount on which the rate is applied keeps changing after each rate application.**

*2)***The DayCount that defines how the length of each time interval is calculated for the purpose of multiplying it with the**

*3)***in order to compute the ensuing interest amount.**

*zero rate*For example, the so called

*'continuously compounded '***for some maturity**

*zero rate***is defined as the number**

*T***that satisfies:**

*r***, where**

*D = e⁻ʳᵗ***is the discount factor at time**

*D***and**

*T***is the length of time until**

*τ***in annual units calculated according to some given daycount convention.**

*T*