Hi All,Valuating a risk-free FRN portfolio should be an easy task. However I am struggling a bit. At coupon payment date the PV of a FRN should equal its nominal value. But I am wondering that shouldn't the value be affected by the reference rate..? I mean that a loan paying 12 month Euribor + 0 bp should be worth more than a loan paying 3 month Euribor + 0 bp due to the 3 vs 12 basis spread. The future payments from a loan paying 12 month euribor will be higher than with the one paying 3 month Euribor... And I am using the same discount curve for both loans.. Have I missed something here...?

Why would you use a discount curve that doesn't reflect the 1s vs 12s basis? Use the correct curve and it will value to par on reset dates.

Er... make that "the 3s vs 12s basis".

DavidJN,That's the problem because i don't see how could I change the discount curve. Why would the discount curve be dependent on the reference rate? If I have a 5 year FRN paying 12m euribor i could do a basis swap to change the cashflow to Euribor 3m + 23bp (current 3 vs 12 spread for 5 years). Thus shouldn't the valution for this FRN at the coupon payment date be: Nominal + PV of 23bps...?