Thread starter
#1

*In reference to R19.P1.T3.FIN_PRODS_HULL_Ch7_Topic:Interest_Rate_Swap_Valuation:-*Hi- Happy Easter everyone ! Have a quick question on the example illustrated below which I was revisiting..

In the FRA Method of IRSwap Valuation:-

i) We calculated/extracted the

**which makes sense because 10.2 is the discrete rate- so we convert the 9 month and the 15 month rate into discrete rates as well.**

*"Continuous"-*Forward Rates.**ii) Next we converted the***"Continuous"-*Forward Rates into "Discrete" Semi-Annual-Forward Ratesiii) Next we calculate the

**Floating CFs**based on the

**"Discrete" Semi-Annual-Forward Rates.**

iv) But then we calculate the Final NET CFs based on the the

**"Continuous"-Discount Factors**!

My Question is that, if we have used the

**"Discrete" Semi-Annual-Forward Rates**for calculating the

**Floating CFs,**should we not have used

**"Discrete"-Semi-Annual-Discount Factors instead of**

**"Continuous"-Discount Factors...?**I may be missing a crucial point here... :-( Much gratitude on any insights on this...

@David Harper CFA FRM @ShaktiRathore First off-My apologies for nudging you guys on this topic knowing it's just out of the Easter weekend ...was waiting to clear this one up and wrap up this topic...and worried that this thread might have gotten lost in the pile of threads over the weekend...so, whenever you guys get a chance, if you could share some insights on this , would be very grateful ...

Last edited:

## Stay connected