Interest rate futures contracts are accompanied by short-term futures contracts. Since future STIRTs are resigned to the same index as a subset of FRAs, IMM-FRAs, their pricing is linked. The nature of each product has a pronounced gamma profile (convexity), which leads to rational price adjustments, not arbitration. This adjustment is called convex term adjustment (ACF) and is generally expressed in basis points.  [3×9 dollars – 3.25/3.50%p.a] means that interest rates on deposits are 3.25% from 3 months and 3.50% from 3 months and 3.50% from 3 months (see also the Bid-Ask spread). The entry of an “FRA payer” means paying the fixed rate (3.50% per year) and obtaining a fluctuating rate of 6 months, while the entry of an “R.C. beneficiary” means paying the same variable rate and obtaining a fixed rate (3.25% per year). If the compensation rate is higher than the contractual rate, the seller fra must pay the amount of compensation to the buyer. If the contract rate is higher than the billing rate, the buyer must pay the amount of compensation to the seller. If the contract rate and the clearing rate are the same, no payment is made. Interest rate swaps (IRS) are often considered a number of NAPs, but this view is technically incorrect due to the diversity of methods for calculating cash payments, resulting in very small price differentials. On the date of fixing (October 10, 2016), the 6-month LIBOR sets 1.26222, the settlement rate applicable to the company`s FRA.
There are several types of interest rate swaps (IRS), including: So far, we have understood that FRAs help us to make interest rate movements. As noted above, the amount of compensation is paid in advance (at the beginning of the term of the contract), while interbank rates, such as LIBOR or EURIBOR, apply to late interest transactions (at the end of the repayment period). To account for this, it is necessary to discount the difference in interest rates using the offset rate as a discount rate. The settlement amount is therefore calculated as the present value of the interest rate difference: since the FRAs are liquid on the day of settlement – the start date of the fictitious loan or contribution – the difference in interest rates between the market interest rate and the rate of the FRA contract determines the risk for each party.