NPV_FRA() function

NPV_FRA() function

NPV_FRA(argument list…)

This function returns the market-to-market (i.e. Net Present Value or NPV) of a FRA from the perspective of the fixed payer. The function uses the following arguments:

Argument	Description	Restrictions
Valuation_Date	valuation date (e.g. today)	valid Excel date number
Start_Date	start of FRA rate period	valid Excel date number >= Valuation_Date
End_Date	end of FRA rate period	valid Excel date number > Start_Date
DCB	day count basis	0 = 30/360 2 = act/360 3 = act/365
Zero_Dates	array of zero coupon curve dates	strictly ascending order The first date of this array must be Valuation_Date
Zero_Rates	array of continuously compounded riskless rates in decimal form (e.g. six percent entered as 0.06) corresponding to Zero_Dates	> 0
Contract_Rate	FRA contract rate in decimal form	> 0
Reset_Rate	settlement rate used to determine payoff if Start_Date < Valuation_Date	> 0
Notional	notional principal underlying	positive number for fixed rate payer, negative number for floating rate payer

If Start_Date < Valuation, the FRA is seasoned and the NPV is computed as the present value of the cash flow difference between the Contract_Rate and the Reset_Rate payments. If Start_Date >= Valuation_Date, the FRA is defined over a future time period and the Reset_Rate argument is ignored. In this case, the NPV is computed as the present value of the cash flow differential between the Contract_Rate and an internally generated forward rate payments.