Forward Rates Agreement Interest Calculation

swarnendupathak
Finance Junkie
Posts: 119
Joined: Mon Sep 17, 2012 11:06 am

Forward Rates Agreement Interest Calculation

Postby swarnendupathak » Thu Nov 08, 2012 9:30 am

Hi, small doubt...
The FRA are used to be for 3 or 6 months for which we nedd to calculate the interest amount. So, is it mandatory to use interest rate with the same compounding frequency i.e. quarterly or half-yearly, even if the rates are mentioned with other compounding frequencies????

Swarnendu

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content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Forward Rates Agreement Interest Calculation

Postby content.pristine » Mon Nov 12, 2012 5:58 pm

That's correct Swarnendu.
We need to ensure that all rates have the same compounding frequencies to use the FRA formula.
We need to compare apples with apples!

8-)


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