# Credit risk in a FRA

In the Schweser examples (pages 9092 on reading 39) they give the formula: payoff = (LIBOR - r)NP*(days in underlying /360) In concept check #10 they calculate the payoff using the loan rate (LIBOR + 150bps) Why the difference and when do you use one vs. the other?

I want to say that one is calculating the payoff and the other is discounting back to today, but not looking

By the way, I found that only Schweser covers credit risk in a FRA in this example… the curriculum only covers forward, swap & option… besides, the LOS only asks us to know credit risk in forward, swap & option as well!!! well… i wonder if we need to know about this for exam!!!

FRA is a forward

i dont think we need to now the calculations of FRA for L3

i caught this as well. i think that what is on page 90 is correct because you are looking at the difference in reference rates (i.e. LIBOR). in concept checker 10, they are comparing the reference rate plus the addon to the libor. this is like comparing apples to oranges. so i think #10 is wrong and it should be: (.03 - .05)(5M)(360/360) / (1+.045)

dont need to know the calc. how easy is the deriv section compared to L2 shuns?

why would schweser show this calc if CFAI doesnt