: Arbitrage on Libor rate and Swap rate I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: http://www.interestrateswapstoday.com/libor-rates.html At

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Arbitrage on Libor rate and Swap rate
I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: www.interestrateswapstoday.com/libor-rates.html
At the time, I read

USD 6-month Libor rate: L6 = 2.8858%

USD 12-month Libor rate: L12 = 3.1006%

USD 1-year Swap rate: S1 = 2.828%

Then, I calculate

6-month zero bond: P6 = 1/(1 + L6*0.5) = 0.9857762347093784

12-month zero bond: P12 = 1/(1+ L12) = 0.9699264601757894

If above 1-year swap rate is semi-annually settled (this is what I understood, but did not see official explanations), then one shall have

1 = S1*0.5*P6 + (S1*0.5+1)*P12

But, the right hand side is equal to 0.9975800962814657, strictly less than 1. Does it mean there is slight arbitrage opportunity, or otherwise I misunderstood on the definition of the rates in the above?

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