This is undoubtedly the best explanation ever of how a FRA works. Lessons at my university, the CFA and Schweser books, dozens of other videos on the internet do not even come close to the clarity and simplicity of your explanation. Sir, you are a fantastic teacher and I do thank you so much for posting this video. It has helped me a lot. My warmest regards.
Excellent video, the concepts were explained in a very simple and easy language. Thanks for providing such explanation in a clear and easily understandable language
This was a marvelous lesson , especially for preparation of exams like CFA . I was however having a problem in acquiring the present value of the profit , in both the Sums I was unable to get the shown answer . Can someone please tell me step by step how was the present value calculated ? FV/ 1+IY was not working for me , I wonder where I'm going wrong
Sir can you explain this question through a video by extrapolating this concept. Unable to grasp the solution through text book. Example: Computing the value of an FRA Suppose the 3-month and 6-month LIBOR spot rates are 4% and 5%, respectively (continuously compounded rates). An investor enters into an FRA in which she will receive 8% (assuming quarterly compounding) on a principal of $5,000,000 between months 3 and 6. Calculate the value of the FRA. Answer: R forward - 0.05 + (0.05 -0.04) X ((1/ (2 - 1)) = 0.06 = 6% R forward (with quarterly compounding) = 4 x (e^(0.06/4)-1)= 0.060452 = 6.05% value = $5,000,000 x (0.0800 - 0.0605) x (0.50 - 0.25) x e^(-0.05)*0.5) = $23,773
Dear Apratim, Thanks for getting in touch with us! You have not indicated if you would like to register for the Classroom or the Online Program. However, we have provided the registration links for both the programs available for your access at your convenience. FinTree FRM Classroom Program- bit.ly/2MFB8ia FinTree FRM Online Program- bit.ly/2wHJwUp For further information, you may email us 24x7 at admin@fintreeindia.com or call us at +91 88880 77722 from 9 am - 9 pm IST (3.30 am - 3.30 pm GMT). Best regards, Team FinTree
yes, actually, N is always 1 year because that's how the FRA payment formula has been established ( I suppose because the bank always displays annuel interest rates that's why we always divide by 1 year) and that's why he multiplied the annuel year 7% by (180*360) since his loan is of a period of 180 days.
I'm studying at La Trobe University Melbourne. I must say, loudly, that Indian teachers are the best one ever. Thank you, man.
I’m starting up this semester a Master of Financial Analysis at La Trobe- any tips?
Next time pay for lectures
@@varunshahvo-tv9854 laude tu khud fukat me dekh rha hai or usko bol rha hai
This is undoubtedly the best explanation ever of how a FRA works. Lessons at my university, the CFA and Schweser books, dozens of other videos on the internet do not even come close to the clarity and simplicity of your explanation. Sir, you are a fantastic teacher and I do thank you so much for posting this video. It has helped me a lot. My warmest regards.
This is quite possibly the best video on FRAs I’ve ever seen! Thank you for the lesson, and good luck to anyone else doing the CFA exam in 2018 :-)
This is the best explanation I've heard in FRAs
I am currently preparing for my CFA level 1 exam this August. Thank you Sir, you are amazing!
I cannot believe how easy you made the whole concept... i was having a headache trying to understand the long formula in the book. Thank you so much.
my lecturer and my text books, made this a monster topic ! 😂😂😂 ! thank u !
The best video on FRA 💯
This video makes FRA so simple, thank you so much for this
Glad it helped! utkarsh
This is extremely insightful, and thank you so much for making it easy to understand and learn!
great tutorial!you were very clear in your speech and concepts were simplified!big help!
Very clear and simple explanation, very easy to understand. GOOD WORK!
Your classes are pretty good man.From Kerala.
Best possible explanation of FRA's. Really easy to grasp the concept and simple to calculate compared to what is taught in the books! Great job!
Excellent video, the concepts were explained in a very simple and easy language. Thanks for providing such explanation in a clear and easily understandable language
Amazing explanation, allows you to understand intuitively
Explained so simply! Thank you
perfectly explained sir.....commendable!!
Thank you, this video helped me to better understand the formula.
Thank you for this video, it helped me to distinguish between the contract maturity period and the loan period
Very well explained, made it easy for me, thanks.
loved it. top work sir
thank you very much sir this video greatly helped me to grasp the concept in a very easy and simple way..........
Very nice explanation , it's very difficult to understand from schweser
10:23 why do we discount using LIBOR?
Thank you so much for this, it really helped me understand FRA. I appreciate you're work. Thanks sir
You're welcome! We're glad that you were able to assimilate the information! - Team FinTree
best explanation ever!!!
THANKS!
wow i just subscribed to ur channel! ur explanations were perfect
This was a marvelous lesson , especially for preparation of exams like CFA . I was however having a problem in acquiring the present value of the profit , in both the Sums I was unable to get the shown answer . Can someone please tell me step by step how was the present value calculated ? FV/ 1+IY was not working for me , I wonder where I'm going wrong
Thanks guy for this video !! :)
Thank u so much sir ur each video helps me a lot please share video on synthetic FRA. plz sir....
Very good teaching.
Hi sir, can there be a convention like 13*19 in FRA?
Excellent explanation.
This is so helpful. Thank you sir
at 7:50, right to borrow is 6% and market is 7%.....you said the opposite.
I think there’s a mistake at 1:50 since you would want interest rates to increase and not decrease
yes he said wrong but eventually wrote the right direction
well done mate thank you so much
In the second example, the current rate is 8% and you calculated iy on 7%. Please answer.
Thank you
What is count convention sir? From Kerala
Sir can you explain this question through a video by extrapolating this concept.
Unable to grasp the solution through text book.
Example: Computing the value of an FRA
Suppose the 3-month and 6-month LIBOR spot rates are 4% and 5%, respectively
(continuously compounded rates). An investor enters into an FRA in which she will receive 8% (assuming quarterly compounding) on a principal of $5,000,000 between months 3 and 6. Calculate the value of the FRA.
Answer:
R forward - 0.05 + (0.05 -0.04) X ((1/ (2 - 1)) = 0.06 = 6%
R forward (with quarterly compounding) = 4 x
(e^(0.06/4)-1)= 0.060452 = 6.05%
value = $5,000,000 x (0.0800 - 0.0605) x (0.50 - 0.25) x e^(-0.05)*0.5) = $23,773
bhut bhut shukriya
Why is N 1?
Shouldn't that be adjusted for the time period as well?
i have to confusion for long IR increase is benefit could u plz clear me
great tutorial
thank you so much
Is the underlying a loan or an interest rate on that loan?
It's the same thing, FRA's are generally cash settled
really helpful!
omg this is amazing!!!
gud one
I am unable to access your website. plase provide your company website as i will be subscribing for frm part 1 exam
Dear Apratim,
Thanks for getting in touch with us! You have not indicated if you would like to register for the Classroom or the Online Program. However, we have provided the registration links for both the programs available for your access at your convenience.
FinTree FRM Classroom Program- bit.ly/2MFB8ia
FinTree FRM Online Program- bit.ly/2wHJwUp
For further information, you may email us 24x7 at admin@fintreeindia.com or call us at +91 88880 77722 from 9 am - 9 pm IST (3.30 am - 3.30 pm GMT).
Best regards,
Team FinTree
Thanks a lot Sir.
Please why N = 1 since it's only 90 days ?
Sir I want a deatails of cfp
is N always 1??
No, It can be anything, here in both example used 1
Can you please give an example where N is different for better understanding
yes, actually, N is always 1 year because that's how the FRA payment formula has been established ( I suppose because the bank always displays annuel interest rates that's why we always divide by 1 year) and that's why he multiplied the annuel year 7% by (180*360) since his loan is of a period of 180 days.
Sorry I am not sure on the long and short part can you please explain again
Thanks a ton
How is I/Y = 1.75% ? 7*(30/360) = 0.58% Can you please explain what am I missing here?
Mika Singh he says 7 X 90/360
great lecture thank you
I belive that this calculations are not require for the level 1 candidates.
love this video
Nice!
Short FRA at 6% with LIBOR at 7% is a net loss of 1%, not a profit? Profit for that would be long FRA?
Spot on , for Long it's a 1% profit (to be adjusted for underlying time) and for Short it will be a loss of 1%
thank your Sir
Saitom Sai thank you for your kind words
WHY WILL LONG BENEFIT IF INTERST RATE INCREASES.It should have been reverse
Aapne Yaha n 1 kyu liya hai..
50000/= PV at 3.5% is 48250/=. Please correct if I’m wrong. Thanks
7.30 .
Mistake
You should work on pronounciation
His pronounciation is fine. You need to work on your listening.
Very well explained sir, thank you so much for making it so easy