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NPV_FRA() function

NPV_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:

Argument Description Restrictions
Valuation_Date valuation date (e.g. today) valid Excel date number
Start_Date start of FRA rate period valid Excel date number
>= Valuation_Date
End_Date end of FRA rate period valid Excel date number
> Start_Date
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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