FRA Payoff ( Long Position ) Calculator

✖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.ⓘ Notional Principal [NP]			+10% -10%
✖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.ⓘ Underlying Rate at Expiration [r_exp]			+10% -10%
✖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.ⓘ Forward Contract Rate [r_forward]			+10% -10%
✖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.ⓘ Number of Days in Underlying Rate [n_ur]			+10% -10%

✖FRA Payoff is the net settlement amount exchanged between the parties at the expiration of the agreement.ⓘ FRA Payoff ( Long Position ) [FRA_p]

⎘ Copy

👎

Formula

✖

FRA Payoff ( Long Position )

Formula

`"FRA"_{"p"} = "NP"*((("r"_{"exp"}-"r"_{"forward"})*("n"_{"ur"}/360))/(1+("r"_{"exp"}*("n"_{"ur"}/360))))`

Example

`"1793.722"="50000"*((("52"-"50")*("96"/360))/(1+("52"*("96"/360))))`

Calculator

LaTeX

Reset

👍

Download International Finance Formulas PDF PDF Image

FRA Payoff ( Long Position ) Solution

STEP 0: Pre-Calculation Summary

Formula Used

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))))
FRA_p = NP*(((r_exp-r_forward)*(n_ur/360))/(1+(r_exp*(n_ur/360))))
This formula uses 5 Variables

Variables Used

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

STEP 1: Convert Input(s) to Base Unit

Notional Principal: 50000 --> No Conversion Required
Underlying Rate at Expiration: 52 --> No Conversion Required
Forward Contract Rate: 50 --> No Conversion Required
Number of Days in Underlying Rate: 96 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

FRA_p = NP*(((r_exp-r_forward)*(n_ur/360))/(1+(r_exp*(n_ur/360)))) --> 50000*(((52-50)*(96/360))/(1+(52*(96/360))))

Evaluating ... ...

FRA_p = 1793.72197309417

STEP 3: Convert Result to Output's Unit

1793.72197309417 --> No Conversion Required

FINAL ANSWER

1793.72197309417 ≈ 1793.722 <-- FRA Payoff

(Calculation completed in 00.004 seconds)

You are here -

Home » Financial » International Finance » FRA Payoff ( Long Position )

Credits

Created by Keerthika Bathula

Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

Keerthika Bathula has created this Calculator and 50+ more calculators!

Verified by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has verified this Calculator and 200+ more calculators!

< 13 International Finance Calculators

FRA Payoff ( Long Position )

Go 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))))

Put-Call Parity

Go Call Option Price = Spot Price of Underlying Asset+Put Option Price-((Strike Price)/((1+(Risk-Free Rate of Return/100))^(No. of Months/12)))

Option Premium

Go Option Premium = ((Share Option Warrant/Number of Securities Per Option Warrant)+(Purchase Price*100/Price Security-100))

Balance of Financial Account

Go Balance of Financial Account = Net Direct Investment+Net Portfolio Investment+Asset Funding+Errors and Omissions

Annualised Forward Premium

Go Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100

Balance of Capital Account

Go Balance of Capital Account = Surpluses or Deficits of Net Non-Produced+Non-Financial Assets+Net Capital Transfers

Current Account Balance

Go Current Account Balance = Exports-Imports+Net Income Abroad+Net Current Transfers

Uncovered Interest Rate Parity

Go Expected Future Spot Rate = Current Spot Exchange Rate*((1+Domestic Interest Rate)/(1+Foreign Interest Rate))

Covered Interest Rate Parity

Go Forward Exchange Rate = (Current Spot Exchange Rate)*((1+Foreign Interest Rate)/(1+Domestic Interest Rate))

International Fisher Effect using Interest Rates

Go Change in Exchange Rate = ((Domestic Interest Rate-Foreign Interest Rate)/(1+Foreign Interest Rate))

Relative Strength Index

Go Relative Strength Index = 100-(100/(1+(Average Gain during Up Period/Average Loss during Down Period)))

Bid Ask Spread

Go Bid Ask Spread = ((Ask Price-Bid Price)/Ask Price)*100

International Fischer Effect using Spot Rates

Go Change in Exchange Rate = (Current Spot Exchange Rate/Spot Rate in Future)-1

FRA Payoff ( Long Position ) Formula

What is FRA Payoff (Long Position) ?

The Forward Rate Agreement (FRA) payoff for a long position refers to the cash settlement received by the party holding the long position in an FRA at the contract's expiration. This payoff is calculated based on the difference between the Settlement Rate and the Contracted Forward Rate, multiplied by the Notional Amount and adjusted for the number of days in the contract period. If the Settlement Rate exceeds the Contracted Forward Rate, indicating that interest rates have risen, the long position holder will receive a positive payoff, representing a gain on the agreement. Conversely, if the Settlement Rate is lower than the Contracted Forward Rate, indicating that interest rates have fallen, the long position holder will incur a negative payoff, representing a loss on the agreement. The FRA payoff formula takes into account these factors to determine the financial outcome for the long position holder at the FRA's maturity.

How to Calculate FRA Payoff ( Long Position )?

FRA Payoff ( Long Position ) calculator 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 calculate 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 calculate FRA Payoff ( Long Position ) using this online calculator? To use this online calculator 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. Here is how the FRA Payoff ( Long Position ) calculation can be explained with given input values -> 1793.722 = 50000*(((52-50)*(96/360))/(1+(52*(96/360)))).

FAQ

What is FRA Payoff ( Long Position )?

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 and is represented as FRA_p = NP*(((r_exp-r_forward)*(n_ur/360))/(1+(r_exp*(n_ur/360)))) or 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)))). 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, 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, 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 & 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.

How to calculate FRA Payoff ( Long Position )?

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 is calculated using 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 calculate FRA Payoff ( Long Position ), you need Notional Principal (NP), Underlying Rate at Expiration (r_exp), Forward Contract Rate (r_forward) & Number of Days in Underlying Rate (n_ur). With our tool, you need to enter the respective value for Notional Principal, Underlying Rate at Expiration, Forward Contract Rate & Number of Days in Underlying Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

Home

FREE PDFs

🔍 Search