A company treasurer needs to borrow 10mil euros for 180 days 60 days from now, the type of FRA and the position to hedge interest rate risk of this transcation are: FRA, Position a) 2x6, long b) 2x6, short c) 2x8, long d) 2x8, short

Another one, On the settlement day of a forward contract: a) the short may be required to sell the asset b) the long must sell the asset or make a cash payment c) atleast one party must make a cash payment to the other d) the long has the option to accept a payment or purchase the asset.

© 2X8 long (so he will pay fix and receive variable)?

For the second I’d say D, but i can see C might work as well.

C is right for the first one, can you explain why he’d go long???


he wants to edge i rate risk so he needs to receive variable

Long=buyer=payer of fix rate in a FRA. He wants to hedge against interest rate risk, meaning against volatility, meaning he wants to receive a variable interest rate.

C and D Though for 2nd one C seems to be right too

the answer for second one is A.

heres the explanation: A forward contract may call for settlement in cash or for delivery of the asset but does not typically contain option to do one or the other. Under a deliverable contract the short is required to deliver the asset at settlement not to make a cash payment.

can someone explain the first one?

I understand why you have to take long position but what does 2x8 mean?. Is it 2 contracts of 8 months FRA???

I’m sorry to trouble y’all, but could someone please explain why 180 days 60 days from now = 2 x8. I read this stuff months ago, and now I can’t put it together.

2 is the time to expiration of the contract, 2 months 6 is the time neded to borrow the money (180=6 months, the LIBOR convention is that a month has 30 days) 2+6=8=total time

figured the first one… 180 days 60 days from now= 240 days from now which is 8 months…


60 days = 2 months 2 months from now he needs to borrow for 180 days 2 + 6 = 8. Am I right on this?

long on FRA = obligation to borrow at Fixed (forward) rate. if that helps.