Discount factors future value calculation using

We will refer to the present value of 1 to be received in period t as the forward discount factor. In our calculations involving swaps, we will compute the forward discount factor for a period using the forward rates. These are the same forward rates that are used to compute the floating-rate payments—those obtained from the EURIBOR futures contract. We must make just one more adjustment. We must adjust the forward rates used in the formula for the number of days in the period (i.e., the quarter in our illustrations) in the same way that we made this adjustment to obtain the payments. Specifically, the forward rate for a period, which we will refer to as the period forward rate, is computed using the following equation ... 

Discount factors can also be used to calculate the future value of a present investment by inverting the formula. In the example above, the six-month discount factor of 0.98756 signifies that 1 receivable in six months has a present value of 0.98756. By the same reasoning, 1 today would in six months be worth... 

Once the swap transaction is completed, changes in market interest rates will change the payments of the floating-rate side of the swap. The value of an interest rate swap is the difference between the present value of the payments of the two sides of the swap. The 3-month EURIBOR forward rates from the current EURIBOR futures contracts are used to (1) calculate the floating-rate payments and (2) determine the discount factors at which to calculate the present value of the payments. 

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See also in sourсe #XX -- [ ]

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