标题: Futures and FRAs [打印本页] 作者: sabaruch 时间: 2011-7-11 20:03 标题: Futures and FRAs
My question pertains to the rates being used in the following examples.
In general,
To determine the future price of a security (assuming no interim cash flows), we calculate: Spot*(1+RFR)^(days/365).
To determine the rate on a 1X3 FRA where 30d Libor is 2.5% and 90d Libor is 3.0%, we calculate: { [ [1 + 0.025(90/360)] / [1 + 0.3(30/360)] ] - 1 } (360/60)
To determine the one year future value of the coupons of an 8% semi-annual pay bond with par value $1 that expires in one year, we calculate: 0.04(1 + RFR/2) + 0.04.
I'm confused as to when to apply exponents and when to apply factors for non-annual terms. Can anyone clarify?作者: chaojimali 时间: 2011-7-11 20:03
If the applicable convention is related to simple (e.g. 2 and 3) versus compounded (e.g. 1) returns then is there an intuition for determining which one should be applied?作者: neil1234 时间: 2011-7-11 20:03
FRAs and Interest rate options use simple, everything else uses compounding
