Any useful input here? I’m hearing maturity to effective date/365, effective to current date/365… Very confused.
I’ll tell you if you can’t figure it out - At termination, the value of the FRA is V = [(r - fixed rate)*fraction of year]/(1+ r*Fraction of year) and r here is some forward reference rate. That means the value of the FRA now is V*Exp(-r1* t) where r1 is the rate from now until termination of the FRA. But duration is all about parallel shifts in interest rates so a change in r is the same as a change in r1. So now you need to calculate dV/dr and you’re rolling…
Did you get it?
Any easy-to-understand answer?