I see that the calculation for valuing FRA’s is in the OPTIONAL segment of chapter 41. I just had a qbank question which asked for the formula which kind of surprised me. Does anyone think this is something worth remembering or prime punting material?

it isnt an LOS so I am not worrying about it

Ok. If anyone is in Chicago and hears “MCAP11!!!” you’ll know that valuing FRA’s was tested.

HAHAHA - nice For derivatives, I am banking on a futures questions (how many contracts to buy/sell or synthetic cash), an options (valuing bull spread, collar, etc) question and a floating/fixed duration question

If this shows up in PM I’m gonna take an educated guess and move on. If it shows up in AM I’ll jot down what I can remember from the L2 formula and grab a point or two.

I think this is part of “optional reading” now, so shouldn’t be tested.

There is a valuation of an interest rate swap in the material and it is therefore required. I was looking this morning though, and it isn’t a biggie: 1) Set your present value factors using the following formula for each reset period: 1/[1+LIBOR(DAYS/360)] 2) Discount the fixed side of the swap. 3) Discount the floating side of the swap. The receiver of the larger of 2 & 3 above is exposed to credit risk.