NPV_FRA() functionNPV_FRA(argument list )
This function returns the market-to-market (i.e. Net Present Value or NPV) of a FRA from the perspective of the fixed payer. The function uses the following arguments:
|Valuation_Date||valuation date (e.g. today)||valid Excel date number|
|Start_Date||start of FRA rate period||valid Excel date number
|End_Date||end of FRA rate period||valid Excel date number
|DCB||day count basis||0 = 30/360
2 = act/360
3 = act/365
|Zero_Dates||array of zero coupon curve dates||strictly ascending order
The first date of this array must be Valuation_Date
|Zero_Rates||array of continuously compounded riskless rates in decimal form (e.g. six percent entered as 0.06) corresponding to Zero_Dates||> 0|
|Contract_Rate||FRA contract rate in decimal form||> 0|
|Reset_Rate||settlement rate used to determine payoff if Start_Date < Valuation_Date||> 0|
|Notional||notional principal underlying||positive number for fixed rate payer, negative number for floating rate payer|
If Start_Date < Valuation, the FRA is seasoned and the NPV is computed as the present value of the cash flow difference between the Contract_Rate and the Reset_Rate payments. If Start_Date >= Valuation_Date, the FRA is defined over a future time period and the Reset_Rate argument is ignored. In this case, the NPV is computed as the present value of the cash flow differential between the Contract_Rate and an internally generated forward rate payments.
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