FRAs

[Steinerja29]

How would you use the equation (1-Last PV factor)/Sum PV Factors for the below since the last Libor is 450 days? IT IS A 6X15 FRA

LIBOR. PV FACTOR

90 day libor. 3.4%. .9916

180 day libor 3.6%. .9823

270 day libor. 3.8%. .9723

450 day libor. 4%. .9524

SUM 3.8986

[125mph]

The equation you listed, SFR = (1 − z_n) / Σ_z_i_ is a swap fixed rate calcuation, not an FRA calculation

To find 6x15 FRA, you would do:

((1 + .04x450/360) / (1 + .036x180/360) - 1) (360/270) = 4.19% annualized.

[CEO10K-DAY]

@125mph

The equation you listed, SFR = (1 − z_n) / Σ_z_i_ is a swap fixed rate calcuation, not an FRA calculation

To find 6x15 FRA, you would do:

((1 + .04x450/360) / (1 + .036x180/360) - 1) (360/270) = 4.19% annualized.

Can we discuss why it’s [1 + .04 * (450/360)] and not 1.04^1.25 ??

[125mph]

Because it’s libor -> nominal rates

[Steinerja29]

Perfect sense. Thank you!

[cadr93]

I had same query and not able to understand …can u explain in little more detail

[ashleytawanda]

Buddy you are mixing up things here FRAs and Swaps are different, u are calculating a Swap but your title says FRA I don’t understand.

[cadr93]

it is an fra swap …interest rate swap

[cadr93]

Can you elaborate it …