4.16 Instantaneous forward rate The instantaneous forward rate for a maturity T is the forward rate that applies for a very short time period starting at T Letting 2→7=7 gives rise to R=R+T T where R is the T-year rate Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University4.16 Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University Instantaneous Forward Rate • The instantaneous forward rate for a maturity T is the forward rate that applies for a very short time period starting at T. Letting gives rise to where R is the T-year rate T R RF R T   = + T2 →T1 =T