Anyone explain how they get this answer: A company treasurer needs to borrow 10 million for 180 days, 60 days from now. The type of FRA and the position he should take to hedge the interest rate risk of this transaction are: FRA Position A. 2 x 6 Long B 2 x 6 Short C 2 x 8 Long D 2 x 8 Short Thanks!
The party that borrow the money goes for long position. So the option left are A & C. 60 days from now = 2(30 *2 =60) 180 days = 6 ( 30*6 =180) Basically by entering this long position you are fixing 6m(180 days) interest rate in 2(60 days) months time So its 2x8 Long. hope this helps.