The page calculates the value of an FRN with and without the margin above reference rate and takes into account the required spread as mentioned in Chapter 4 - Floating Rate Bond. Prior to the pricing an FRN, the reference curve have to be setup and can be done via 'Short Term Rates' and 'Long Term Rates' tab which contain the relevant fields for user input.
One of the main input is 'Value Date' (below) which has been defaulted to Jun 17, 2020. Please change the date accordingly.
Changing the dates will recalculate the discount factors in relevant tab. It does not, however, recalculates the value in FRN tab. FRN can be recalculated using the new discount factor by clicking the 'Calculate' button available in the calculator.
To gain further understanding on the how the discount factors are calculated from the rates, user are recommended to read Chapter 4 - Building Discount Curve From Par Bonds
This is the short term portion of the reference curve. We have defaulted the rates for various tenors. User may delete the rates which are irrelevant and the discount factors can still be generated via interpolation.
This is the long term portion of the reference curve. We have defaulted the rates for various tenors. User may delete the rates which are irrelevant and the discount factors can still be generated via interpolation.
The whole curve is required in order to calculate the forward reference rate thus forward coupon rate and forward the forward rate (including the spread) to discount the calculated cash flows. For further information please read up Chapter 4 - Floating Rate Bond.
Pricing of a FRN can be done with the provided calculator. Change the values in the 'FRN PRICER' and click 'Calculate'. The table will be updated with new values and PVBP01 will be recalculated.
The cash flow structure is tabulated in the following table. User can construct a different cash flow structure by varying the margin for each coupon period. The FRN will be revalued and pvbp01 recalculated.