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A $125 million interest rate swap has a remaining life of 10 months. Under the terms of the swap, six-month LIBOR is exchanged for 4.25%
A $125 million interest rate swap has a remaining life of 10 months. Under the terms of the swap, six-month LIBOR is exchanged for 4.25% per annum (compounded semiannually). Six-month LIBOR forward rates for all maturities are 3.75% (with semiannual compounding). The six-month LIBOR rate was 3.4% per annum two months ago. OIS rates for all maturities are 3.25% with continuous compounding. What is the current value of the swap to the party paying floating? What is its value to the party paying fixed?
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