Settlement amount for a Forward Rate Agreement (FRA) formula
Financial acronyms
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Description of the Settlement amount for a Forward Rate Agreement (FRA) formula
This formula allows calculating the settlement amount due at an FRA's settlement date.
Formula
\[ S=C \cdot \frac{\left ( r_{set} - r_{fra} \right ) \cdot \frac{\left (d_{mty}-d_{set} \right )}{dbase}}{1+\left (\frac{\left (d_{mty}-d_{set} \right )}{dbase} \cdot r_{set} \right )} \ \]
Symbols
\(C\ \)
Notional principal amount
\(d_{base}\ \)
Number of days per year (360, 365 or 366 depending on day-count convention)
\(d_{mty}\ \)
Maturity date of the FRA
\(d_{set}\ \)
Settlement date of the FRA
\(r_{fra}\ \)
FRA contract rate
\(r_{set}\ \)
Settlement rate
\(S\ \)
Settlement amount