Has anyone done the EOCs for Forwards yet? I thought I had a good understanding of FRAs, but need clarification on one part of valuing them at some point prior to maturity. I’m utilizing both the CFAI material and Schweser.
From what I can gather from the CFAI material (i.e. EOC #9 and #10), they find the “market value” of an FRA, however, it does not appear that they discount the “interest savings” back at the applicable LIBOR rate. Unless I am not reading it correctly, I don’t even see them mention discounting the value back at all.
In Schweser, they ask you to “calculate the value of an FRA prior to settlement” and they specfically address discounting this value back. They do, however, use a different method for finding this value.
When CFAI asks for the “market value” are they asking for the undiscounted value at the end of the term of the loan and not the current market value? Does “market value” and “value prior to settlement” mean the same thing?
Am I overthinking this? Any help is appreciated.