Forward Rate Agreement
A Forward Rate Agreement (FRA) is a financial instrument that represents the one off exchange of a fixed rate of interest for a floating rate at a future date.
For example, a FRA might involve an agreement to exchange the difference between the fixed rate of 1% and the GBP LIBOR rate in 2 months time.
A FRA is represented in Strata using the
Fra class stores details of the product that was agreed.
The trade details are stored in
Fra can be created using a builder as follows:
Fra fra = Fra.builder() .buySell(BuySell.BUY) .notional(1_000_000) .startDate(LocalDate.of(2015, 6, 15)) .endDate(LocalDate.of(2015, 9, 15)) .fixedRate(0.01) .index(IborIndices.GBP_LIBOR_3M) .build();
TIP: The strata-loader project provides the ability to load a FRA from FpML and CSV.
strata-measure module provides high-level risk measures for FRAs.
The main entry point is
The following measures are available:
- present value, detailed breakdown, and associated sensitivity
- single-node bucketed gamma
- par rate
- par spread
- currency exposure
- current cash
These measures are also available using the calculation API.
strata-pricer module provides lower-level pricing support for FRAs:
The following table summarizes the fields on
Fra that can be used to control the product.
For more detail on the meaning of each field, see the
|buySell||Whether the FRA is buy or sell||Required|
|currency||The primary currency||Defaults to the currency of the index|
|notional||The notional amount||Required|
|startDate||The start date||Required|
|endDate||The end date||Required|
|businessDayAdjustment||The holiday adjustment to the start/end date||Optional|
|paymentDate||The payment date||Defaults to the
|fixedRate||The fixed rate of interest||Required|
|index||The Ibor index to observe||Required|
|indexInterpolated||The second Ibor index to observe, when interpolating||Optional|
|fixingDateOffset||The offset to the fixing date||Defaults to the offset of the index|
|dayCount||The day count||Defaults to the day count of the index|
|discounting||The approach to FRA discounting||Defaults based on the currency|
The fixed interest rate must be specified in decimal form. A 5% rate is specified as 0.05.
Three methods of FRA discounting are supported - ‘None’, ‘ISDA’ and ‘AFMA’. These correspond to the ISDA 2006 definitions.