MT 340 Field Specifications

25. Field 17F: FRA Discounting

FORMAT

Option F

1!a

(Flag)

PRESENCE

Mandatory

DEFINITION

This field specifies whether FRA discounting is applicable or not.

CODES

The following codes must be used (Error code(s): T36):

N	FRA discounting is not applicable.
Y	FRA discounting is applicable.

USAGE RULES

In a FRA where FRA discounting is not applicable, the calculation on fixing date is done as follows:

Floating amount = notional amount * settlement rate * day count fraction.

Fixed amount = notional amount * contract rate * day count fraction.

If floating amount > fixed amount, then the FRA seller pays the difference between the two amounts to the buyer.

If floating amount < fixed amount, then the FRA buyer pays the difference between the two amounts to the seller.

When FRA discounting is applicable, the FRA amount is calculated as follows:

FRA amount = (notional amount * ((settlement rate - contract rate) *day count fraction)) / (1 +(settlement rate * day count fraction)).

If the FRA amount is positive, this amount is paid by the FRA seller to the buyer.

If the FRA amount is negative, this amount is paid by the FRA buyer to the seller.