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rmeenaks
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Posts: 186
Joined: May 1st, 2006, 2:31 pm

Newbie question on FRA

August 17th, 2006, 1:13 am

Hi,I am reviewing my Futures class notes over again and ran into a slight problem with an example in the "Dubofsky & Miller - Derivatives, Valuation and Risk Management" book. I believe it is an error in the book, but there are no errata postings at all. So, here goes:On Sept 2, a bank sells a 2 x 5 FRA with a principal amount of $500 million at a forward rate of 6%. On settlement, the 3-month LIBOR spot rate is 4.8%. A year is defined as 360 days.The book calculates the day count as 91 days, but I got 92 days. Further examples in the book have similar calculations like the one I got. Am I right?Thanks,RamPS: Is there an errata and solutions manual for this book? I have the solutions for some of the chapters that were covered in class. I would like to get all the chapters...
 
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amit7ul
Posts: 571
Joined: December 7th, 2004, 8:36 am

Newbie question on FRA

August 17th, 2006, 4:28 am

may be there is an adjustment in dates required for holidays...
 
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cemil
Posts: 221
Joined: September 16th, 2005, 7:44 am

Newbie question on FRA

August 17th, 2006, 8:20 am

it is a problem of holidays. suppose the 2 sept 2003, 2 nov 2003 and 2 feb 2004. the"2 nov 2003 " is a sunday so you need to adjust to the 3 nov 2003. Then the days count is 91.
 
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rmeenaks
Topic Author
Posts: 186
Joined: May 1st, 2006, 2:31 pm

Newbie question on FRA

August 17th, 2006, 12:35 pm

But the book didnt mention anything about which yearit was calculating on. Nor did it mention anything about non-GBD calculations.That just stinks. It it only for the days that start in the month, or does it go furtherby using all holidays in the period...Thanks for the help,Ram
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