A $100 million interest rate swap has a remaining life of 10 months. Under the terms of
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A $100 million interest rate swap has a remaining life of 10 months. Under the terms of the swap, six-month LIBOR is exchanged for 4% per annum (compounded semiannually). Sixmonth LIBOR forward rates for all maturities are 3% (with semiannual compounding).
The six-month LIBOR rate was 2.4% two months ago. OIS rates for all maturities are 2.7%
with continuous compounding. What is the current value of the swap to the party paying floating? What is the value to the party paying fixed?
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