- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 4. Forward Rate Agreements
CFA Practice Question
A 60-day FRA on 180-day Libor would be referred to as ______.
A. 2 x 6
B. 2 x 8
C. 2 x 4
Explanation: The 2 indicates that the FRA expires in two months (60 days). The difference between 2 and 8, 6, indicates the underlying 180-day Libor.
User Contributed Comments 3
| User | Comment |
|---|---|
| kjw88 | So the difference between 2 and 8 (6) refers to the fact that it is 6 month Libor? |
| Mclarke | That is a strange naming rule, I would guess its 2X6. |
| PeterHaber | If we have AxB it means A months loan beginning in B months, so, 60 day FRA beginning in 180+60 days. Convert it to months, 2 month FRA beginning in 8 months = 2x8 |