R51 Forward Markets and Contracts

[IFT Team]

[Xenofon Damalas]

Hi,

my question relates to the valuation of the FRA at a day (lets denote it t1) following the Pricing of the FRA (lets denote it t0). I understood from the lecture on the Video that in order to compute the market value of the FRA we have to calculate the difference of the two FRAs, i.e. the FRA price at t0 and the FRA at the day t1. Then we have to discount the result back to time t1 using the current rate. But when I try to work out the example 4 of the Curriculum and particular question C as well as Practice Problems  9 and 10, i cannot get to calculate the correct answer. It is like the curriculum does not discount the difference with the current rate. In example 4 I calculate the result to be 21,330 i.e. 22,000/(1+5.95%*190/360)

if you have any hint on what i am doing wrong or how is the curriculum calculation explained please advise.

Regards

Xenofon Damalas

On Tuesday, August 6, 2013 3:53:44 PM UTC+3, IFT Team wrote: