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.
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Hi John,
Need your help with this please.
Now 1 June. Receiving £7.1m in 5 months to invest for 4months. for FRA it will be 5V9 (3.50% – 3.45%). current yield is LIBOR + .60%, LIBOR is 4%
Sept futures 96.25, Dec Futures 96.60My solution for FRA if LIBOR fall by 0.5%
Transaction it self 7.1 x (4.6%x4/12) = £108867.LIBOR falls by 0.5%
Transaction 7.1m x (4.1×4/12) = £97033 rec
FRA 7.1m x (4.1-3.45)x4/12 = £15383 payto get futures lock in…i buy december futures @ 96.60
Lock in Rate
1 June –> 5months 1 Oct –> 2months 31 Dec total 7months
Futures 96.60
Interest 4% 96.00
Basis 0.60 0.18(2/7×0.60) 0.00Lock in
Futures 96.60
basis (0.18)
Lock in = 96.42Am i on the correct track please?
Many Thanks
Carlos
Thanks John.
Also, is there another lecture on Swaps please. I get confused as to who pays who/ who receives what and what they receive/pay after the swap.
Also if a question says the current basis on March futures is 44 basis point, does that mean that march futures are 99.56?
Thanks
The only swaps lecture is the one in the list of lectures. If you have problems with any specific questions then do ask and I will help you.
If the current basis is 44 basis points, then it means that the futures are 0.44 different from the current LIBOR rate.
(The basis is the difference between the futures price and LIBOR)
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