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An interest rate swap with notional value of 100m has a remaining life of 9 months. The terms of the swap require the 6-month LIBOR
- An interest rate swap with notional value of 100m has a remaining life of 9 months. The terms of the swap require the 6-month LIBOR to be exchanged for 5.5% per annum with semi-annual compounding. The current swap rate being exchanged for LIBOR in swaps of all maturities is 4.75% per annum with continuous compounding. Three months ago the 6-month LIBOR was 5.25% per annum.
Please answer question a )!!!!!!!
- Explain, using a diagram, how the swap is constructed. (30 marks)
- Calculate the value of the swap to the party paying the floating rate. Assume that the swap takes place without involving a financial intermediary. (40 marks)
- Discuss the principle that underpins swap valuation. (30 marks)
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Market Integrity Do Our Equity Markets Pass The Test
Authors: Robert A. Schwartz , John Aidan Byrne, Eileen Stempel
1st Edition
3030028704,3030028712
