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Suppose that the term structure of interest rates is flat in both Turkey and the US. The Turkish rate is 9.1% per annum and US
Suppose that the term structure of interest rates is flat in both Turkey and the US. The Turkish rate is 9.1% per annum and US rate is 4.5% per annum, both with continuous compounding. Some time ago, a financial institution has entered into a currency swap in which it pays 4% per annum in dollars and receives 11% per annum in Turkish liras, once a year. The principles are $10,300,000 and TRY39,200,000. The swap will last for another 3 years and current exchange rate is $1 = TRY3.85. Calculate the MtM from the financial institution's perspective
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