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Hull chapter 7 , question 7.3


In the solution while calculating swap price in terms of FRA why are the time periods takes as 0.25 and 0.75?? Unlike in bond calculation time are 0.333 and 0.833... Which seems more logical to me.

David Harper CFA FRM

David Harper CFA FRM
Staff member
Hi @shivanin Sorry, that is a mistake in the solution (the FRA dates should be the same): as the swap exchanges every six months and matures in 10 months, the two cash flows occur at +4/12 and +10/12. So it should look something like below: