Performance scenarios of a deal based on a 3X6 Forward
Performance scenarios of a deal based on a 3X6 Forward
PERFORMANCE SCENARIOS of a deal based on a 3X6 Forward
Rate Agreement on Libor in USD.
| Parameters | Abbreviation | Value |
| FRA Fixed Rate Payer (%): | P | 6% (fixed leg) |
| Trade size (per Notional): | TS | $1,000,000 |
| Margin %: | M | upon agreement between counterparties |
| BUY/LONG (Paying fixed/receiving floating) | Opening Price | Closing Price (incl. spread) | Price change | Profit / Loss |
| Favourable | 6% | 6.4% | 0.4% | $4000 |
| Moderate | 6% | 6.2% | 0.2% | $2000 |
| Unfavourable | 6% | 5.6% | -0.4% | -$4000 |
| Stress | 6% | 5.3% | -0.7% | -$7000 |
| SELL/SHORT(Paying Floating/Receiving fixed) | Opening Price | Closing price (incl. spread) | Price change | Profit / Loss |
| Favourable | 6% | 5.6% | -0.4% | $4000 |
| Moderate | 6% | 5.8% | -0.2% | $2000 |
| Unfavourable | 6% | 6.4% | 0.4% | -$4000 |
| Stress | 6% | 6.7% | 0.7% | -$7000 |
Profit and loss calculated above are payable/receivable in 6 months from today. However, FRAs are settled once the LIBOR is fixed and known which is 3 months from today. All the Profit and loss amount are then discounted using the discount rate available which usually is the same of the LIBOR above.
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2021-02-02 • Updated
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