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the formula is:

Notional principal [underlying market rate at expiration - FRA rate (days in underlying/360) / [1 + underlying market rate at expiration (days in underlying /360)]

So if your notional was AUD$10m; FRA rate quoted for say a 1/4 contract was 4%; market rate at expiration was 5%, then:

= 10m [0.05 - 0.04 (90/360) / [1+ 0.05 (90/360)

The Long would receive under this payoff scenario given market rates have increased.

NB 'underlying' refers to the reference interest rate, and 'days in underlying' refer to the term of this reference rate i.e 90-day BBSY

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