Question: I need help with the mathematical answer to this. A general answer in words will not be helpful. 3. FRAs A bank has borrowing needs
I need help with the mathematical answer to this. A general answer in words will not be helpful.
3. FRAs A bank has borrowing needs at time T> 0. Show that by combining an FRA trade today with a libor loan at time T, the bank can today lock in its interest cost for the period T to T + a. Does the borrowing bank need to buy or sell the FRA to do this? What is the fixed rate that the bank locks in? 3. FRAs A bank has borrowing needs at time T> 0. Show that by combining an FRA trade today with a libor loan at time T, the bank can today lock in its interest cost for the period T to T + a. Does the borrowing bank need to buy or sell the FRA to do this? What is the fixed rate that the bank locks in
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