yospaghetti

Job - You are a lifesaver on this topic. I was totally confused but once I went through your example, I was able to apply it to the rest of the chapter. Thanks for the in depth explanation.

ASSet_MANagemen

Job great post. Made my life much easier.

kingstongal

at the payment day - coupon has reset… so it is just the face value (1$) isn’t it?

studyn

It should be 10 mil since it reset at the payment day (day 180)

draz

Yes it is….a bit confusing as you have to assume the payment on the floating side is out of the picture, but I guess that’s why they say it resets on those dates.

dvilayphet

it’s funny i was about to ask this question as well:
How do you value a floater if you are at the payment day.
So it’s just the face value. I know. my question is why don’t we add the coupon payment here. just for the understanding! sorry!
because if its 20days before expiration we always do payment plus par value.

svgleeson

Coupon Resets to 0…. that’s why

Roflnadal

What happens after first payment day? . Let’s say you’r 10 days after first payment day? How much is the floater worth then?
I get that there is a new rate for LIBOR , set on first payment day , payable on the second payment day. Would it worth that new rate discounted by a revised LIBOR reading each day ?

koba

at that point you know the 2nd LIBOR rate.
so the PV(2nd Libor Rate + the Full Principal) is the floating payment…

jcfa2011

I understand all the math behind it, but I don’t understand how the comparison is fair.
We are including 2 coupons from the fixed side, and only 1 coupon from the floating side. Why isn’t compared 1 coupon with 1 coupon?