## oFRNctm_Price( ) Example

Description

Consider a Floating Rate Note with a valuation date of 1 July 2003, a settlement date of 3 July 2003, an effective date of 10 January 2003, and a maturity date of 10 January 2006. The FRN, which has quarterly resets and semi-annual coupons, is trading at a discount margin of 20 basis points. The accrual basis is actual/365 and the constant notional amount is \$100,000. Cash flows that fall on a business day are not adjusted, while discount factors are used to interpolate rates and discount factors.

Determine the fair value of the FRN.

Function Specification

=oFRNctm_Price(20, {"1/7/03", "3/7/03", "10/1/03", "10/1/06"}, 3, 2, L2:M13, O2:P7, 100000, 1, I2:J3, R2:T17, {4,4}, {1,1}, 2, , 1, 0)

Parameter Name

Parameter Value

Discount Margin

20

Valuation Date

1 July 2003

Settlement Date

3 July 2003

Effective Date

10 January 2003

Maturity Date

10 January 2006

ResetFrequency

3

Payment Frequency

2

Quoted MarginRS

L2:M13

Quoted MarginCP

O2:P7

Notional Amount

100000

Notional Flag

1

Past Reset Rates

I2:J3

Zero Curve

R2:T17

Accrual Basis RS

4

Accrual Basis CP

4

1

1

Reset Offset

2

Holiday Schedule

Interpolation Method

1

Output Flag

0

Where the cell references contain the following information (excluding the headers):

Quoted Margin RS (L2:M13):

Reset Date

QM (bp)

.

8/1/03

25

8/4/03

35

8/7/03

25

8/10/03

35

8/1/04

25

8/4/04

35

8/7/04

25

7/10/04

35

6/1/05

25

7/4/05

35

7/7/05

25

6/10/05

35

Quoted Margin CP (O2:P7):

Effective Date

QM (bp)

.

10/1/03

15

10/7/03

10

10/1/04

15

10/7/04

10

10/1/05

15

10/7/05

10

Past Reset Rates (I2:J3)

Reset Date

Reset Rate

.

8/1/03

0.051010

8/4/03

0.051150

Where the required reset dates and effective dates are derived from the oFRNctm_Dates( ) example. Refer to the FRN Examples - Zero Curve topic for the Zero Curve.

Solution

The following results are obtained:

20

99,916.8365

2,665.1620

102,581.9984

2.235017

2.234994

6.387462

22.866198