UFR Calculator

Formula

The formula to calculate the Ultimate Forward Rate (UFR) is:

\[ UFR = (1 + LTR)^{\frac{1}{T}} - 1 \]

Where:

Ultimate Forward Rate (UFR): A method used in the valuation of long-term liabilities in insurance and pension funds. It is a theoretical rate that long-term interest rates are expected to converge to over time.
Long Term Rate (LTR): The long-term interest rate used in the calculation.
Time (T): The time in years over which the rate is calculated.

Let's say the Long Term Rate (LTR) is 0.05 (5%) and the time (T) is 10 years. Using the formula:

\[ UFR = (1 + 0.05)^{\frac{1}{10}} - 1 \]

We get:

\[ UFR \approx 0.00488 \]

So, the Ultimate Forward Rate is approximately 0.00488 (or 0.488%).