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FRA Payoff ( Long Position ) Formula

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FRA Payoff is the net settlement amount exchanged between the parties at the expiration of the agreement. Check FAQs

FRA p = NP \cdot (\frac{(r exp - r forward) \cdot (\frac{n ur}{360})}{1 + (r exp \cdot (\frac{n ur}{360}))})

FRA_p - FRA Payoff?NP - Notional Principal?r_exp - Underlying Rate at Expiration?r_forward - Forward Contract Rate?n_ur - Number of Days in Underlying Rate?

FRA Payoff ( Long Position ) Example

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Here is how the FRA Payoff ( Long Position ) equation looks like with Values.

Here is how the FRA Payoff ( Long Position ) equation looks like with Units.

Here is how the FRA Payoff ( Long Position ) equation looks like.

1793.722 = 50000 \cdot (\frac{(52 - 50) \cdot (\frac{96}{360})}{1 + (52 \cdot (\frac{96}{360}))})

1793.722 = 50000 \cdot (\frac{(52 - 50) \cdot (\frac{96}{360})}{1 + (52 \cdot (\frac{96}{360}))})

1793.722 = 50000 \cdot (\frac{(52 - 50) \cdot (\frac{96}{360})}{1 + (52 \cdot (\frac{96}{360}))})

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FRA Payoff ( Long Position ) Solution

Follow our step by step solution on how to calculate FRA Payoff ( Long Position )?

FIRST Step Consider the formula

FRA p = NP \cdot (\frac{(r exp - r forward) \cdot (\frac{n ur}{360})}{1 + (r exp \cdot (\frac{n ur}{360}))})

Next Step Substitute values of Variables

∴

FRA p = 50000 \cdot (\frac{(52 - 50) \cdot (\frac{96}{360})}{1 + (52 \cdot (\frac{96}{360}))})

Next Step Prepare to Evaluate

∴

FRA p = 50000 \cdot (\frac{(52 - 50) \cdot (\frac{96}{360})}{1 + (52 \cdot (\frac{96}{360}))})

Next Step Evaluate

∴

FRA p = 1793.72197309417

LAST Step Rounding Answer

∴

FRA p = 1793.722

FRA Payoff ( Long Position ) Formula Elements

Variables

FRA Payoff

FRA Payoff is the net settlement amount exchanged between the parties at the expiration of the agreement.

Symbol: FRA_p

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find FRA Payoff

Notional Principal

Notional Principal is the nominal or face value of a financial instrument, representing the amount used to calculate payments and obligations but not necessarily exchanged.

Symbol: NP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Notional Principal

Underlying Rate at Expiration

Underlying Rate at Expiration refers to the benchmark reference value upon which the terms of a derivative contract are based when the contract reaches its maturity date.

Symbol: r_exp

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Underlying Rate at Expiration

Forward Contract Rate

Forward Contract Rate is the agreed-upon price at which two parties agree to exchange an asset or currency at a future date, regardless of the prevailing market rate at that time.

Symbol: r_forward

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Forward Contract Rate

Number of Days in Underlying Rate

Number of Days in Underlying Rate refers to the duration or period over which the interest rate is observed or measured within a financial contract or calculation, typically expressed in days.

Symbol: n_ur

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Number of Days in Underlying Rate

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How to Evaluate FRA Payoff ( Long Position )?

FRA Payoff ( Long Position ) evaluator uses FRA Payoff = Notional Principal*(((Underlying Rate at Expiration-Forward Contract Rate)*(Number of Days in Underlying Rate/360))/(1+(Underlying Rate at Expiration*(Number of Days in Underlying Rate/360)))) to evaluate the FRA Payoff, The FRA Payoff ( Long Position ) represents the cash settlement amount received by the party holding the long position in a Forward Rate Agreement (FRA) at the expiration of the agreement. FRA Payoff is denoted by FRA_p symbol.

How to evaluate FRA Payoff ( Long Position ) using this online evaluator? To use this online evaluator for FRA Payoff ( Long Position ), enter Notional Principal (NP), Underlying Rate at Expiration (r_exp), Forward Contract Rate (r_forward) & Number of Days in Underlying Rate (n_ur) and hit the calculate button.

FAQs on FRA Payoff ( Long Position )

What is the formula to find FRA Payoff ( Long Position )?

The formula of FRA Payoff ( Long Position ) is expressed as FRA Payoff = Notional Principal*(((Underlying Rate at Expiration-Forward Contract Rate)*(Number of Days in Underlying Rate/360))/(1+(Underlying Rate at Expiration*(Number of Days in Underlying Rate/360)))). Here is an example- 1793.722 = 50000*(((52-50)*(96/360))/(1+(52*(96/360)))).

How to calculate FRA Payoff ( Long Position )?

With Notional Principal (NP), Underlying Rate at Expiration (r_exp), Forward Contract Rate (r_forward) & Number of Days in Underlying Rate (n_ur) we can find FRA Payoff ( Long Position ) using the formula - FRA Payoff = Notional Principal*(((Underlying Rate at Expiration-Forward Contract Rate)*(Number of Days in Underlying Rate/360))/(1+(Underlying Rate at Expiration*(Number of Days in Underlying Rate/360)))).

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FRA Payoff ( Long Position ) Formula

FRA Payoff ( Long Position ) Example

FRA Payoff ( Long Position ) Solution

FRA Payoff ( Long Position ) Formula Elements

Other formulas in International Finance category

How to Evaluate FRA Payoff ( Long Position )?

FAQs on FRA Payoff ( Long Position )

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