On a FRA, the libor is an add-on libor and on a future the libor is a discount libor. can someone confirm this is true with some sort of explanation.
pepp Wrote: ------------------------------------------------------- > On a FRA, the libor is an add-on libor > Yes > and on a future the libor is a discount libor. > Mmm…Not really. A futures contract on an interest rate like LIBOR or Eurodollars (both traded contracts) the futures contract just looks like a discount instrument. It’s not and there is no convexity to the contract. If a ED rate changes by 1 tick the contract value changes by $25 regardless of level. This is a problem you will explore more in LII. > can someone confirm this is true with some sort of > explanation.