Derivatives Answers

Derivatives - Q1

A fund manager buys a 0R6 Interest Rate Forward with a notional amount of £50,000,000 with an FRA rate of 4.5%.
This is a 6 month forward rate starting today.
Todays date is 15 March 2017.
The settlement date is 17 March 2017 (T + 2).
The fixing date is 15 March 2017.
The maturity date is 15 September 2017 (in 6 months)
The reference rate is LIBOR
What is the settlement amount ?

= ( (settlement rate - FRA rate) * principal days ) / ( (365 * 100) + (days * settlement rate) )

Derivatives - Q1

A fund manager buys a 3R9 Interest Rate Forward with a notional amount of £50,000,000 with an FRA rate of 4.5%.
This is a 6 month forward rate starting in 3 months time.
Todays date is 15 March 2017.
The settlement date is ?
The fixing date is ?
The maturity date is 15 December 2017 (in 9 months)
The reference rate is LIBOR
What is the settlement amount ?

Derivatives - Q1

Can you calculate the 6R12 using the 0R6 and the 0R12 ?
The following equation must be true
( 1 + (0R6 * 0.5) ) * ( 1 + (6R12 * 0.5) ) = ( 1 + (0R12 * 1) )

Derivatives - Q

A fund manager buys 20 Short Sterling STIR 3-month future contracts at 94.88 and sells them the next day at 94.96.
How much profit has he made?

The tick size (or minimum price movement) is 0.01%
The price movement is 0.08 (or 8 ticks)
profit = (ticks gained * tick value * no of contracts)
profit = (ticks gained * (tick size * contract * time) * no of contracts)
profit = 8 * (0.01 * 500,000 * (3/12)) * 20
profit = 8 * 12.5 * 20
profit = £2,000.00

Derivatives - Q

A fund manager buys a EuroDollar 3-month future contract at 99.25
If the value changes by one basis point (0.01%) what the movement in the contract value ?

The tick size (or minimum price movement) is 0.005%
tick value = (tick size * contract * time)
tick value = (0.005% * 1,000,000 * (90/360)
tick value = $12.50