Question
A portfolio manager entered a swap with a dealer. The swap's notional principal is $1000, payments are to be made very quarter, and the swap
A portfolio manager entered a swap with a dealer. The swap's notional principal is $1000, payments are to be made very quarter, and the swap allows netting of payments. The dealer agrees to pay a fixed annual rate of 6%, while the asset manager agrees to pay the return on SP500 index. The SP500 index at the initiation is 295. If SP500 six months later becomes 262. How much would be the payment from the dealer to the asset manager? Note: You should use a positive number to represents the amount the dealer pays to the dealer. You should use a negative number represents the amount that the dealer receives from the manager
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started