i think i’ve been using 365 all along and getting question correct. never thought twice about it til i saw this thread and looked in schweser. sorry for stirring up the controversy.
I saw all these replies and thought for sure someone had written a response that was going to make the lightbulb go on, but alas, I’m still in the dark. I’ll have to pick one and hope they don’t have two answer choices so close together.
Hi Smarshy, Never thought there will be so many contracdictory ans. I will bit eloborate my initial reply For all LIBOR based quotes use 360 days ( FRA, Swaps, Caps, Floors). FX and all other secutrities except Bonds 365 days. For bonds: Forwards-365 days ( CFAI book 6 page 32) Futures-360 days. I am sure there will be more contradictory ans…
Rakesh, that’s exactly what FastEd and I said, minus the portion about forwards / futures. CFASF1, when I said thanks and stuff I was just joking around cause I was confused, I don’t think it came through right, cause I don’t htink there’s a contreversey going on.
FRA notation uses 360 because each month is 30 days. 30*12=360 PV of coupon or dividends or cash flows are periodic/365.
bswan, i knew you were joking around… i was just sorry cause i thought i was getting everyone more confused. BUT to put it to rest… i ran into an actual problem from the 2006 test today, a currency forward problem, and they used 365 days. i think that should close the case. there better be a swap problem on the freaking test, because i put 3 more hours into it today!
F1 - hopefully in your 3 hours you spent some time with swaps and what their equivelance is to other instruments…
eh it wasn’t all swaps. there was a vignette in there on options as well, which i feel better about since i’ve acutally used options. never in my life have i put on a swap…
Just had review class on Derivatives today and this is per the lecturer: a. Use 360: T-bills, zeroes, strips, and FRA b. Use 365: Coupon bonds, Equities, Currencies