Beruflich Dokumente
Kultur Dokumente
5/4/12
5/4/12
they are negotiated between counter-parties, is no daily settlement or marking-tomarket, exchange guarantees performance are cash-settled at the settlement date with no interim cash flows.
5/4/12
there no
FRAs
notional refers to the condition that the principal does not change hands, but is only used to calculate the value of interest payments. The buyer of the FRA agrees to pay a fixed-rate coupon payment and receive a floating-rate payment against the notional principal at some specified future date. The seller of the FRA agrees to pay a floating-rate payment and receive the fixed-rate payment against the same notional principal.
5/4/12
payment (at the exercise/contract rate) and receive a floating-rate payment against a notional principal amount at a specified future date.
The buyer of an FRA will receive (pay) cash when the actual interest rate at settlement is greater (less) than the exercise/contract rate (specified fixed-rate).
and receive a fixed-rate payment against a notional principal amount at a specified future date.
The seller of an FRA will receive (pay) cash when the actual interest rate at settlement is less (greater) than the exercise rate.
5/4/12
deferment period
dealing date spot date fixin g date reference rate determine d
contract period
settlemen t date settlemen t sum paid maturit y date
5/4/12
On the dealing date, two parties to the FRA agree on all the terms.
E.g. dealing date = Monday 12th April 1993 two parties agree to trade 1x4 FRA in $1M at 6.25% Meaning: contract currency = US dollar contract amount = $1 million contract rate = 6.25% 1x4 one-month period between the spot date and the settlement date
four-month period between the spot date and final maturity of the notional loan
the
Spot date is normally two business days after the dealing date, so it is
5/4/12
The fixing date is when the reference rate is determined and it is two
The reference rate is the rate on which the two parties agree to take as a
payments at 3-month LIBOR and will make fixed rate payments at 7%.
5/4/12
a 6-month maturity based on a $1 million notional principal amount floating rate is 3-month LIBOR and the fixed (exercise) rate is 7 percent
observed three months from the present, for a security with a maturity date six months from the present.
So, the settlement is 3 months from today and the maturity is
contract maturity by comparing the prevailing 3-month LIBOR with 7 percent. 5/4/12
percent. $2,451.
5/4/12
three months later at the maturity of the instrument, the actual payment is discounted at the prevailing 3-month LIBOR:
5/4/12
5/4/12
and receive floating-rate as a hedge if it was exposed to a loss in a rising rate environment.
with short futures, rising rates means falling prices falling prices mean selling for higher at the beginning and buying for cheaper at the end
5/4/12
with long futures, falling rates means rising prices rising prices means buying for cheaper at the beginning and selling for higher at the end
5/4/12
Thank You
5/4/12