- This topic has 7 replies, 2 voices, and was last updated 2 months ago by
John Moffat.
John Moffat.-
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Frooti
- Topics: 63
- Replies: 64
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Expected futures price on 1 February if interest rates increase by 0.5%
= 100 – (3.8 + 0.5) – 0.22 = 95.48How they have calculated closing future price as formula goes by
closing future price =100- closing spot-unexpired basisSo unexpired basis = 22*1/3=7.33
Please explain the calculation
Frooti
- Topics: 63
- Replies: 64
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Also can you pls show alternative method for swap calculation as method in exam kit is confusing
John Moffat
- Topics: 57
- Replies: 50004
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Strictly, the examiner should have not called it ‘the expected futures price’ but should have called it ‘the lock-in rate’.
As far as the unexpired basis is concerned, the question specifically says that it will be 22 basis points on the date of the borrowing (1 Feb).
John Moffat
- Topics: 57
- Replies: 50004
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You can find an answer for the swap in the way that I show it in my lectures (and find more logical) in my reply to a previous post here:
Frooti
- Topics: 63
- Replies: 64
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Not understood
John Moffat
- Topics: 57
- Replies: 50004
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Which part do you not understand?
Have you read the reply that I linked to, and have you watched my lectures on swaps?
Frooti
- Topics: 63
- Replies: 64
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yes, i have watched lectures , and saw link but not getting why 22 is used as unexpired basis , it is basis as per question so unexpired basis calculation we should do right?
John Moffat
- Topics: 57
- Replies: 50004
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The current basis is 44 points. If it is 22 points on 1 February then it has fallen by the difference of 22 points. 22 points has therefore expired which leaves 22 points as being unexpired. (And it will keep falling until by the end of March 44 points will have expired and there will be 0 points unexpired).
Frooti
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