Basic Derivatives FRA Question

From previous examples, I have learned that: A 6 x 12 FRA expires in 180 days and is based on 180 day LIBOR A 3 x 6 FRA expires in 90 days and is based on 90 day LIBOR ~~~~ I am looking at reading 59, page 131, Question #9 “The six month FRA rate three months from now” is closest to… Question: What does this mean: “The six month FRA rate three months from now” is closest to…? Does this mean it is a 6 x 9 FRA? What is H in this question? (and why) What is M in this question? (and why) Thanks in advance,

The six month rate 0 months from now would be 0x6 (6 minus 0 = 6 month interest period) The six month rate 3 months from now would be 3x9 (9 minus 3 = 6) I dont have the book with me so cannot help with “H” and “M”…

you are better off using the method for FRA and SWAPs that JScott24 had laid out on the forum for the 2008 batch - as opposed to using the method and formulae laid out in the text book. (do a search). JScott24’s method is also incidentally in the Stalla videos by David Hetherington.

h + m is the longer period, i.e., 3 + 6 FRA 3 x 9

I think I see it now. Mostly it is a wording issue. To be honest I had the cheat, I had to look at the answer and go backwards. It is given in the answer that: “This requires a decomposition of the 270 day rate.” The forward rate (right from the answer) = [1 + (h+m rate rate)(h+m/360) / [ 1 + .0371(90/360)] -1 x [360/m] So, therefore h = the expiration date = 90 m = based on n-days LIBOR = 180 h+m = 270 = matures in 270 days Therefore this is a 3 x 9 FRA But the hard part is the wording: and PLEASE CORRECT ME IF I AM WRONG “The six month FRA rate three months from now” This means: it is a 3 x 9 FRA and “three months from now” = expires in 3 months “The six month FRA” = it is based on 180 day LIBOR is this correct?

to CPK I will do a search now. Thanks. I have learned that there are ways of learning/looking at new materials that are different from CFA/Schweser. Sometimes, these other ways are EXTREMELY HELPFUL