# Thread: FRA 2 x 8

1. ## FRA 2 x 8

FRA 2 x 8

Date: November 11, 2010 10:15AM

2 months to expiration over a total of 8 periods? can someone elaborate thx

2. Date: November 11, 2010 11:23AM

2 x 8 means rate agreement expires after 2 months, profit or loss is calculated on the difference of 180 day money market rate prevailing on the day of expiration and the locked in forward rate over the notional principal. A discount is applied since theoritically(not in reality) payment happens after 180 days from the day of expiration.

So if you are long on 2 x 8 FRA at 5.25% and LIBOR 180 is 5.85% after 2 months
over a 1MM notional

[1,000,000 * ( .60 * 180/360)/100 ] / 1.003 = 2991.02

This is what I remember from my first reading

3. Date: November 11, 2010 12:33PM

2 X 8 FRA = 180 day(6 month) LIBOR, 60 days (2 months) from now

and the 8 stands for 8 months until the end of the interest rate period (2 + 6 = 8)

4. Date: November 12, 2010 10:19AM

thx!

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