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oFRNstd_Price( ) Example

Description

Consider a Floating Rate Note with a valuation date of 1 June 2004, a settlement date of 2 June 2004, an effective date of 13 January 2004, and a maturity date of 13 January 2009. The FRN is trading at a discount margin of 10 basis points, and the semi-annual coupons are based on a quoted margin of 25 basis points. The last reset rate was 4.95%, while the (constant) forecasted reset rate is 5.00%. The accrual basis is actual/365, the discount rate is 5.10%, and the notional amount is $100,000. Cash flows that fall on a business day are not adjusted.

Based on a valuation method that uses the Equal/Exact assumption, determine the fair value of the FRN.

 

 

Function Specification

=oFRNstd_Price(2, 10, "1/06/04", "2/6/04", "13/1/04", "13/1/09", 2, 25, 100000, 0.0495, 0.05, 0.051, 4, 1, , 0)

 

 

 

Parameter Name

Parameter Value

 

 

 

 

 

Model

2

 

 

Discount Margin

10

 

 

Valuation Date

1 June 2004

 

 

Settlement Date

2 June 2004

 

 

Effective Date

13 January 2004

 

 

Maturity Date

13 January 2009

 

 

ResetFrequency

2

 

 

Quoted Margin

25

 

 

Notional Amount

100000

 

 

Last Reset Rate

0.0495

 

 

Forecast Reset Rate

0.0500

 

 

Discount Rate

0.0510

 

 

Accrual Basis

4

 

 

Business Day Convention

1

 

 

Holiday Schedule

 

 

 

Output Flag

0

 

 

 

Solution

The following results are obtained:

Discount Margin

10

Clean Price

100,581.7329

Accrued Interest

2007.3922

Dirty Price

102,589.1250

Macaulay Duration

3.981293

Modified Duration

3.981273

Convexity

19.122478

Price Value of a Basis Point

40.843529

 

 

For further details on how the above prices and statistics are calculated, see the FRN pricing formula.

 

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