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Discount Curve Builder

Calculate the Average Discount Factor instantly.

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Average Discount Factor

0.93

Discount Factor Year 1

0.98

Discount Factor Year 2

0.96

Discount Factor Year 3

0.93

Discount Factor Year 4

0.90

Discount Factor Year 5

0.87

Forward Rate Year 2

2.4%

Forward Rate Year 3

2.8%

Forward Rate Year 4

3.2%

Forward Rate Year 5

3.6%

1Step 1

Discount Factor Year 1

Discount Factor Year 1=11+Spot Rate11\textit{Discount Factor Year 1} = \frac{1}{{1 + \textit{Spot Rate}_{1}}^{1}}
2Step 2

Discount Factor Year 2

Discount Factor Year 2=11+Spot Rate22\textit{Discount Factor Year 2} = \frac{1}{{1 + \textit{Spot Rate}_{2}}^{2}}
3Step 3

Discount Factor Year 3

Discount Factor Year 3=11+Spot Rate33\textit{Discount Factor Year 3} = \frac{1}{{1 + \textit{Spot Rate}_{3}}^{3}}
4Step 4

Discount Factor Year 4

Discount Factor Year 4=11+Spot Rate44\textit{Discount Factor Year 4} = \frac{1}{{1 + \textit{Spot Rate}_{4}}^{4}}
5Step 5

Discount Factor Year 5

Discount Factor Year 5=11+Spot Rate55\textit{Discount Factor Year 5} = \frac{1}{{1 + \textit{Spot Rate}_{5}}^{5}}
6Step 6

Forward Rate Year 2

Forward Rate Year 2=1+Spot Rate221+Spot Rate11−1\textit{Forward Rate Year 2} = \frac{{1 + \textit{Spot Rate}_{2}}^{2}}{{1 + \textit{Spot Rate}_{1}}^{1}} - 1
7Step 7

Forward Rate Year 3

Forward Rate Year 3=1+Spot Rate331+Spot Rate22−1\textit{Forward Rate Year 3} = \frac{{1 + \textit{Spot Rate}_{3}}^{3}}{{1 + \textit{Spot Rate}_{2}}^{2}} - 1
8Step 8

Forward Rate Year 4

Forward Rate Year 4=1+Spot Rate441+Spot Rate33−1\textit{Forward Rate Year 4} = \frac{{1 + \textit{Spot Rate}_{4}}^{4}}{{1 + \textit{Spot Rate}_{3}}^{3}} - 1
9Step 9

Forward Rate Year 5

Forward Rate Year 5=1+Spot Rate551+Spot Rate44−1\textit{Forward Rate Year 5} = \frac{{1 + \textit{Spot Rate}_{5}}^{5}}{{1 + \textit{Spot Rate}_{4}}^{4}} - 1
10Step 10

Average Discount Factor

Average Discount Factor=∑i=15Discount Factori5\textit{Average Discount Factor} = \frac{\sum_{i=1}^{5} \textit{Discount Factor}_{i}}{5}

Understand the Discount Curve Builder

Overview

This calculator builds a simple five-year discount curve for technical-provisions valuation.[1][2] It converts visible spot rates into discount factors and implied forward rates that can then be reused on the `BEL Valuation` and `Risk Margin` pages.

Input Terms

  • Spot Rate Year 1 to Year 5: The annual spot rates used to value cashflows at each tenor.

Technical Rationale

Discounting is a separate step from projecting cashflows. This page keeps that boundary clear by focusing only on curve-building outputs. For each tenor it produces a discount factor, then derives the implied forward rates between adjacent maturities so users can inspect the shape of the curve rather than only its endpoints.

This first version is intentionally baseline-only. It gives one reusable curve payload for the main technical-provisions chain without mixing in longer-term guarantee features or scenario overlays.

Important Notes

  • This page is the baseline curve builder only. It does not include MA, VA, transitional measures, or other particular-case adjustments.
  • Negative spot rates are allowed above the hard floor implied by the discount-factor formula.
  • The key reusable outputs are the five Discount Factor values, which can be entered directly into the `BEL Valuation` page.

Sources

  1. Directive 2009/138/EC - Art. 77 (Calculation of technical provisions) - EIOPA
  2. Methodology for the relevant risk-free interest rate term structure - European Commission

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.