Wasn't there a question on FRA's and a swap like the 08 am?
1) Wasn't there an example of having to value fra's in the text somewhere? I did all of risk management today and expected to see it...did i miss something?
2) Also, is there a problem somewhere like number 7' swap valuation on the 2008 am exam?
It was where we had to value two fixed payments versus a floating? (See Below)
3)Last, in the Q Below the answer states
The PV(fixed-leg) = ((1+(0.055*(180/360)*0.9911)+
((1+(0.055*(180/360)))*0.9649)=1.0187
Correct me if Im wrong, but isnt this errata? We only add a "1" to the last payment on the fixed, correct? The sample above shows it on both payments - gave me fits....
Shouldn't it be
The PV(fixed-leg) = (((0.055*(180/360)*0.9911)+ //notice the lack of 1
((1+(0.055*(180/360)))*0.9649)=1.0187
Swap:
? entered a one-year interest rate swap four months ago;
? RR receives floating payments based on LIBOR and pays a fixed rate of 5.5
percent;
? the two-month LIBOR is 5.35 percent;
? the eight-month LIBOR is 5.45 percent;
? the next floating payment will be 5.4 percent;
? assume semi-annual payments based on 30 days in a month, 360 days in a year.
For Red River, the present value of the liability side of this
swap (fixed-leg) is greater than the present value of the asset
side of the swap (floating-leg). Therefore, the market value
of the swap for RR is negative. The counterparty’s market
value of the swap is positive, thus subjecting the
counterparty to credit risk.
The present values of the fixed-leg and floating-leg are:
The PV of floating-leg equals 1 (the notional principal)
plus the next floating payment discounted by the 2-month
factor.
PV(floating-leg) =(1+(0.054*(180/360))*0.9911)=1.0179
The PV(fixed-leg) = ((1+(0.055*(180/360)*0.9911)+
((1+(0.055*(180/360)))*0.9649)=1.0187
Therefore the market value of swap to RR equals
= 1.0179-1.0187 = (0.0008)
Where the PV factors for 2 and 8 months are, respectively:
1/(1+0.0535*(60/360))=0.9911
1/(1+0.0545*(240/360))=0.9649
Edited 1 time(s). Last edit at Friday, June 3, 2011 at 12:08AM by rolo550. |
发表于 2011-7-13 16:19
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