They can avoid the "who is due" entirely by just saying that the contract's payoff is $2,000.Buyer/seller but more importantly it is clearly best in the case of confusing FRAs to specify who pays/receives the fixed ("srike" or "contract") rate.To your questions, while I agree with GARP's math, I disagree with its (lazy) language. Some would refer to 15 months as maturity but but settlement is when the cash exchanges. The payoff gets discounted to $1,976.28 the settlement date per the discounting formula. ![]() The contract period is 3 months because the reference rate is 3 month LIBOR: the 3-month LIBOR beginning in 12 months, which is a forward rate that we can express as F(1.0, 1.25). The payoff (or payment) of $2,000 is based on +15 months = 12 months to settlement + 3 months "contract period".I just answered you here about FRAs ( ) so I want to be brief: GARP's math here looks fine.
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