# Panic! 2f3 is the notation for?

What does 2f3 stand for? It’s some type of derivative… An FRA? Wiley was notating something differently than the CFAI text and now I can’t remember what!

f2,3 you mean?

starts/expires in 2 months and it’s a 3mth fra

Oh. cool. thanks.

Nope, 2f3 is 2-year forward rate starting 3 years from today.

http://financialexamhelp123.com/calculating-forward-rates-from-spot-rates/

Thanks, tickersu!

Actually, and I’m not sure why, Magician’s method is different from the book. Highland has it consistent with the text (this is concerning me and confusing me)…f(2,1) would be a 1 year rate starting 2 years from today (according to the book).

Where is the Magician when you need him?! (cough, cough)

Ack! So f(2,1) is the same as 1f2? I hope I don’t mess this up on the exam. Also foreign currencies…Either I am losing money in real life or getting the problems wrong on CFAI because the quotes are interpreted differently than on investment sites. Groan.

Why not try and acquaint yourself with the notation in the CFAI text, which is F(2,3), meaning the forward contract starts 2 years from today and expires after 3 years from its START DATE or 5 years from TODAY.

As a mnemonic, take the first digit in the bracket (in this case 2), then interpret the “F” as from today. That has really helped me a whole lot.

Cheers

Ack! So f(2,1) is the same as 1f2? I hope I don’t mess this up on the exam. Also foreign currencies…Either I am losing money in real life or getting the problems wrong on CFAI because the quotes are interpreted differently than on investment sites. Groan.

No Lammy. That simply means the Forward rate 2 years from TODAY, which expires 1 year after the start date. The first term in the bracket here is 2, so that automatically means 2 years from today. The next term in the bracket is 1, which means when it WILL END after IT STARTS.

Got it lammy?

I do. Thank you, thank you.

No, lammy was correct. 1f2 and f(2,1) are the same. 1f2 means a 1 year rate starting 2 years from today and f(2,1) means a rate starting 2 years from today for 1 year.

I also figured it out-- the number directly to the right of the f is how long from today before it starts, and the other number is the length for the rate. This has been right, regardless of the notation.

It took me some time to memorize this,

f(S,T)

S=start

T= time/duration/length whatever you wana call it.

so, f3,5 = starts in 3mths and it goes on for 5mths

another way to say this is “it expires in 3mths and you get to lock in the rate for 5mths”

Hello mate, what I addressed was the CFAI text notation F(X, Y), and not the Wiley/Elan notation of xFy.

I believe at Level I, CFAI used the xFy notation. In either case, they’re telling you the same information (which I figured out after looking a little further). I thought it was important to clarify that lammy was correct in saying 1f2 is the same as f(2,1).

Okay Tickers. I got you… smiles. Added that to my tool kits now. Just didn’t want to bother my head with the Wiley notation, since I was pretty cool with that of the CFAI. But no knowledge is lost anyways, you know.

Hey Lammy… Kindly note that you were right…Cheers All.

When I saw the notation, I was worried they might give us either one. I will have CFAI notation in my head, as you said, but it cant hurt knowing both (just in case)!