Does anyone have any good guidance here? I am having some trouble understanding this…
Like all of accounting or…Forward Rate Agreements?
Haha
lol one is more of an issue id say than the other at this point in time!
No - forward rate agreements…
I guess knowing that the LIBOR curve is annualized, and that you have to de-annualize it is a bit tricky, and then re-annualize for your answer…
For Derivatives, always a LIBOR rate is used multiply the rate for the number of days until maturity and divide by 360
r = LIBOR * d/360
once you have done all the calculations needed remember to annualize the rate of the Swap or FRA for comparability
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A good tip regarding FRA is to remember that on a JxK FRA the payment is made on Month J, therefore always discount the interest savings (which will occur on K months ) due to the FRA to period J