I would like to ask how to calculate the FRA discount rate and Swap discount rate (3M, 6M, 9M, 1Y…etc). Given, FRA 1 x 4 0.123% FRA 2 x 5 0.124% FRA 3 x 6 0.144% FRA 6 x 9 0.186% Swap 1Y 0.234% Swap 2Y 0.256% Swap 3Y 0.322% Swap 4Y 0.412% Thank you.
I don’t recall seeing FRA and swap discount rates (as you’ve described) at Level I. Where did you get these numbers?
just question from my classmate… is it level 2?
anyway, is there any simple equation for FRA and SWAP, i can just find some very complex equation in google…
A simple question for . . . what, exactly, about FRAs and swaps?
Are you asking if there’s a simple formula to calculate the price (i.e., the fixed rate) of an FRA? Yes.
To calculate the price of a plain vanilla interest rate swap? Yes.
Something else? Again, what, exactly?
sorry for not telling my question clearly, i know solve it.
the problem i got is that for calculating the 1x4 FRA, i dont know the interest rate of 1M. Now i know getting it by bootstrapping, which refer to other money market instrument.
if then, i can get the discount factor easily by 1/(1+t *r)
thank you.
Yes, the fixed rate on a 1×4 FRA is the 3-month forward rate starting 1 month from today; you can calculate that rate using the 1-month spot rate and the 4-month spot rate.
You do not need to know this (for FRAs) for Level I; it’s a Level II topic.