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PIB A5.2.6

A future on an interest rate and a forward rate agreement must be treated as two notional zero coupon government Securities as follows:

(a) where an Authorised Firm sells an interest rate future or buys a forward rate agreement:
(i) the notional short position has a maturity equal to the time to expiry of the future (or the settlement date of the forward rate agreements) plus the maturity of the borrowing period; and
(ii) the notional long position has a maturity equal to the time to expiry of the future (or the settlement date of the forward rate agreement); and
(b) where an Authorised Firm buys an interest rate future or sells a forward rate agreement:
(i) the notional short position has a maturity equal to the time to expiry of the future (or the settlement date of the forward rate agreement); and
(ii) the notional long position has a maturity equal to the time to expiry of the future (or the settlement date of the forward rate agreement) plus the maturity of the deposit period.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]