Dv01 of FRA

balajismz
Finance Junkie
Posts: 63
Joined: Mon Nov 05, 2012 9:13 am

Dv01 of FRA

Postby balajismz » Fri Nov 09, 2012 8:16 am

Roughly estimate the DV01 for a 2 * 5 CHF 100 million FRA in which a trader will pay fixed and receive floating rate.

A. CHF 1,700
B. CHF (1,700)
C. CHF 2,500
D. CHF (2,500)

Ans given is C

I reckon it should be 4 as the trader is paying fixed and receiving floating

For fixed leg the duration will be 3 months and for the floating leg it is close to 0 (approx.)

So the ans should have been -0.25 * 100M * 0.0001 = -CHF 2,500.

Can someone pls check this out

Balaji

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

Re: Dv01 of FRA

Postby content.pristine » Mon Nov 12, 2012 6:39 pm

DV01 and PVBP are always positive numbers :D
8-)

balajismz
Finance Junkie
Posts: 63
Joined: Mon Nov 05, 2012 9:13 am

Re: Dv01 of FRA

Postby balajismz » Tue Nov 13, 2012 1:41 pm

So no matter whether we are talking with respect to the buyer or seller of the FRA, DV01 is always positive and the same for both??

Please let me know if the understanding is right.

Balaji

balajismz
Finance Junkie
Posts: 63
Joined: Mon Nov 05, 2012 9:13 am

Re: Dv01 of FRA

Postby balajismz » Tue Nov 13, 2012 1:44 pm

Also, suppose we are talking about only duration and not DV01, the duration value can be both positive and negative isnt it.

E.g. Buyer of a bond will have positive duration and seller will have exactly the contra side which is negative.

Pls confirm.

Balaji


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