T12 fx A B D E F G H 1 1 K i N 0 P Q R S U C 55,000,000 1 fixed loan TSLA 55,000,000 Barclays 4 5 6 floating floating Interest rate 7 TSLA agrees to pay 1.85% per annum on a notional $55m at 6 month intervals for 5 years. 1.8500% N- 55,000,000 10 = = 11 12 1 In return TSLA will receive a floating rate on the notional over the same time period from Barclays. Barcalys will pay floating = LIBOR + 125bp = ( LIBOR + 1.25%) % Current LIBOR is quoted at 0.550% per annum 13 14 Tantri 15 16 What is the floating rate Barcalys pays? Who is long? Who is short? 17 19 19 0.5xy.J'N reminder if rates are quoted annually and you are calculating 6 month payment must adjust by half 2. At the first swap interval (6 month) what is the net payment and by whom? 21 22 23 24 26 If AIG sells CDSs to banks that have created loans to corporations during a pandemic, 27 what could possibly go wrong that might repeat the events in the 2008 CDS market ? Try to name 3 events that could occur 28 29 211 > 31 Directions Swap dataset Option-BS ExtraOption-Binomial + T12 fx A B D E F G H 1 1 K i N 0 P Q R S U C 55,000,000 1 fixed loan TSLA 55,000,000 Barclays 4 5 6 floating floating Interest rate 7 TSLA agrees to pay 1.85% per annum on a notional $55m at 6 month intervals for 5 years. 1.8500% N- 55,000,000 10 = = 11 12 1 In return TSLA will receive a floating rate on the notional over the same time period from Barclays. Barcalys will pay floating = LIBOR + 125bp = ( LIBOR + 1.25%) % Current LIBOR is quoted at 0.550% per annum 13 14 Tantri 15 16 What is the floating rate Barcalys pays? Who is long? Who is short? 17 19 19 0.5xy.J'N reminder if rates are quoted annually and you are calculating 6 month payment must adjust by half 2. At the first swap interval (6 month) what is the net payment and by whom? 21 22 23 24 26 If AIG sells CDSs to banks that have created loans to corporations during a pandemic, 27 what could possibly go wrong that might repeat the events in the 2008 CDS market ? Try to name 3 events that could occur 28 29 211 > 31 Directions Swap dataset Option-BS ExtraOption-Binomial +