Skip to contentSkip to search

Ask the Tutor ACCA AFM

Interest rate future

SSaimon7y ago
Sir in your lecture, when calculating the “FUTURE PRICE” at transaction date you have calculated the basis as follow Basis= (100 – Libor rate) – Future price now i want to calculate Lock in rate for future at transaction date so does this lock in rate indicate the Libor lock in rate??? Do i have to calculate “overall expected lock in rate” to calculate the outcome of future hedge??? (Overall expected lock in rate means = Libor lock in rate + credit spread) So which one is the actual future price at transaction date "libor lock in rate" or "overall expected lock in rate" I hope you understand what i m trying to say
John MoffatJohn MoffatTutor7y ago#1
The lock-in rate is what one might call the LIBOR lock-in rate. If the company is paying more than LIBOR then the same amount needs adding to the lock-in rate.
Sign into reply to this topic.