Duration of FRA effective, current, hearing, useful, input

DoubleDip

Any useful input here?

I'm hearing maturity to effective date/365, effective to current date/365......

Very confused.

NakedPuts2011

I'll tell you if you can't figure it out -

At termination, the value of the FRA is V = [(r - fixed rate)*fraction of year]/(1+ r*Fraction of year) and r here is some forward reference rate.

That means the value of the FRA now is V*Exp(-r1* t) where r1 is the rate from now until termination of the FRA. But duration is all about parallel shifts in interest rates so a change in r is the same as a change in r1. So now you need to calculate dV/dr and you're rolling...

bpdulog

Er thanks!

Roflnadal

Did you get it?

aidebaobao

Any easy-to-understand answer?