1 The following term structure of LIBOR is given. Term 90 days 180 days 270 days 360...
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1 The following term structure of LIBOR is given. Term 90 days 180 days 270 days 360 days Rate 6.00% 6.20% 6.30% 6.35%
- Find the rate on a new 6 9 FRA
- . . Consider an FRA that was established previously at a rate of 5.2 percent with a notional amount of $30 million. The FRA expires in 180 days, and the underlying is 180-day LIBOR. Find the value of the FRA from the perspective of the party paying fixed and receiving floating as of the point in time at which this term structure applies.
2 Suppose you are long a 180-day LIBOR-based FRA (receive floating) with notional amount of 8. 9. $50,000,000. At expiration, LIBOR is 4 percent and the strike rate (the agreed-upon rate) is 3 percent. Assuming a 360-day year, what is the dollar profit or loss on this FRA? How would your answer change if you were short (receive fixed)? Is your answer to this question twice the amount of the previous question? Why or why not?
Related Book For
Introduction to Derivatives and Risk Management
ISBN: 978-1305104969
10th edition
Authors: Don M. Chance
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