Simple Swap Clarification

question, practice

What does it mean the value of the fixed rate side, does that mean the value of the swap to the fixed rate side? , hence a value of $0.99768 means the fixed side loses? Say if the value of the floating side was $1.01066, that means the floating side wins?

A practice exam question in Schweser book 1. Page 65 # 117.I was confused by their wording.

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benbenxiong

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发表于 2011-7-13 14:49 | 只看该作者

Value to the fixed rate side means value to the fixed rate payer.

NO EXCUSES

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sameeragarwal

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发表于 2011-7-13 14:49 | 只看该作者

vinniepaz730 Wrote:
-------------------------------------------------------
> What does it mean the value of the fixed rate
> side, does that mean the value of the swap to the
> fixed rate side? , hence a value of $0.99768 means
> the fixed side loses? Say if the value of the
> floating side was $1.01066, that means the
> floating side wins?
>
> A practice exam question in Schweser book 1. Page
> 65 # 117.I was confused by their wording.
>
> Thanks

No you cannot say that. It depends on who is receiving the fixed/floating and paying fixed/floating. Lets assume that I am receiving fixed and paying floating

Then,
0.99768 - 1.01066 = -0.01298 x 1,000,000 (assumed) = -12,980

I have to pay the floating side $12,980. So yes the floating side wins.

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SpyAli

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发表于 2011-7-13 14:49 | 只看该作者

thanks you are the best!

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