Question
To compute the notional principal of the swap, we first need to find the duration of the swap. This is equivalent to finding the duration
To compute the notional principal of the swap, we first need to find the duration of the swap. This is equivalent to finding the duration of the three-year bond, with interest of 4.5% per annum.
| Period | Cash Flows | PV Factor | PV CF | t * PV |
| 1 | 4.5 | 0.95694 | 4.31 |
|
| 2 | 4.5 | 0.91573 | 4.12 |
|
| 3 | 104.5 | 0.87630 | 91.57 |
|
| Sum | 100.00 |
| ||
| Duration |
|
How to find t* PV. Please help
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Derivatives Markets
Authors: Rober L. Macdonald
4th edition
321543084, 978-0321543080
