S
Student2010
Member
IAre principle amounts always included in the calculation of the value of FRA's?
In the solution to q3.6 in the Q&A banks the principal amount is included.
Value = (- discounted value principle lent at start) + (discounted value of principle plus interest received at end)
Also the formula given in notes doesn't work:
Value of FRA = L(Rk - Rx)(T2-T1)e(-R2T2)
Does this only apply at outset?
Is it only interest rate swaps that don't include principal amounts?
Thanks
In the solution to q3.6 in the Q&A banks the principal amount is included.
Value = (- discounted value principle lent at start) + (discounted value of principle plus interest received at end)
Also the formula given in notes doesn't work:
Value of FRA = L(Rk - Rx)(T2-T1)e(-R2T2)
Does this only apply at outset?
Is it only interest rate swaps that don't include principal amounts?
Thanks