mapping FRA

[ajsa]

Hi David,

"The forward rate agreement can be decomposed into two zero coupon building blocks. If the position is long a 6 x 12 FRA, the building blocks are:
Long 6 month bill plus (+)
Short 12-month bill"

I wonder where is the preset fixed rate in this scenario? I understand FRA = (preset fixed rate - fwd rate) (T2 - T1) * exp(-R2 * T2)

Thanks.

 

[David Harper CFA FRM]

Hi ajsa,

please see reply here as Liming had related question: http://forum.bionicturtle.com/viewthread/1913/

Thanks, David