sir, while calculating the value of FRA to long we take RCL 1 in the denominator but in this rcl 1 amount ( i.e 1.067*9/12) is different from the one we have taken ( i.e 1.075*6/12). Can you tell me why and also in the video u are saying we have to pull end value to 3 so we are taking 6/12 but by this logic if we put rcl 1 then we are pulling it to 0 not 3.
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The confusion over here is that first step is we find no arbitrage rates at the initiation of contract(bada factor by chota factor) and you put bada factor in RCL 1 and chota factor in RCL 2 and find rate for the FRA.
2)Now in your example the 3 months have passed but ‘In example the 6m rate is already given the new one’ so you don’t have to find the new rate if it was not given then you have to find the new one for example: If it was for 60*270 FRA and 20 days have passed since initiation so you to find new rate at today by doing 250 days ka factor STO1 and 40 days ka factor STO2 and new rates come as per term structure now you do the valuation of FRA. [old F- new F]/RCL1 this is pulling the ans where you standing. We don’t take old RCL1 which used to calculate the rate at initiation.