How would you use the equation (1-Last PV factor)/Sum PV Factors for the below since the last Libor is 450 days? IT IS A 6X15 FRA
LIBOR. PV FACTOR
90 day libor. 3.4%. .9916
180 day libor 3.6%. .9823
270 day libor. 3.8%. .9723
450 day libor. 4%. .9524
The equation you listed, SFR = (1 − zn) / Σ_zi_ is a swap fixed rate calcuation, not an FRA calculation
To find 6x15 FRA, you would do:
((1 + .04x450/360) / (1 + .036x180/360) - 1) (360/270) = 4.19% annualized.
Can we discuss why it’s [1 + .04 * (450/360)] and not 1.041.25 ??
Because it’s libor -> nominal rates
Perfect sense. Thank you!
I had same query and not able to understand …can u explain in little more detail
Buddy you are mixing up things here FRAs and Swaps are different, u are calculating a Swap but your title says FRA I don’t understand.
it is an fra swap …interest rate swap