Interest Rate Futures (IRF) Calculator

20 Jan 2014

by Arjun Parthasarathy

Methodology for Theoretical Price

The theoretical futures price shall be calculated as per the below formula

Theoretical future price = cash price+ financing cost – Income on cash positions

Where,

Cash price of the underlying = Clean price + Accrued interest

Financing cost = Financing cost for the period on Cash price

Income on cash position = Accrued interest expected to be received on expiry + Coupon payment + Interest on coupon payment

The component of coupon payment and interest on coupon payment are applicable in case of any coupon payments falling during the holding period.

The clean price of the underlying security shall be arrived as under or as per the method specified by relevant authority from time to time-

a) Weighted average price of the respective underlying bond in last two hours of trading on NDS-OM

b) If no trades are executed in the underlying bond then, a theoretical price with reference to FIMMDA rates shall be used

Calculator for IRF

Download (XLSX, 14KB)

One Month Intensive Training Program on Interest Rate Futures is starting on 3rd March 2014 Click here for details

About the Author

Arjun Parthasarathy is dedicating his experience of over twenty years in financial markets to guide investors to the path of informed decision making on their investments. The more informed the investor, the more money the investor will make is the guiding principle of Arjun. The fact that he has worked across markets including equities, interest rates, credits and currencies and across market platforms of fund management, proprietary trading and research, gives Arjun the extra edge that is required to guide investors to make the right investments in the globalized nature of markets.