Assume that you are analyzing a plain vanilla interest rate swap with the following characteristics:
Counterparty X : Counterparty Y pay fixed rate 6% : pay floating rate LIBOR + 0.5% receive floating rate LIBOR + 0.5% : receive fixed rate 6% Swap tenor: 10 years Notional principal: $1,000,000 LIBOR0: 4.75%
If this were an "in-advance" swap, Counterparty X would make its first fixed rate payment at the time the swap is negotiated. The amount of the payment would be:
A. $60,000
B. $52,500
C. $57,279.24作者: Kiakaha 时间: 2011-7-13 16:35
The question is worded oddly.
Y pays fixed - 60000
X pays floating - 52500
I think the answer is B.
They would normally be netted though, so the actual payment would be from Y - 7500.作者: rgonzalez 时间: 2011-7-13 16:35
fixed rate payment = 1 Million * 6% = 60K? A
CP作者: Mechanic 时间: 2011-7-13 16:35
I thought it said Y pays fixed?
"Counterparty Y pay fixed rate 6%"
I'm having trouble reading the question. Was it originally in chart form?作者: Bulla564 时间: 2011-7-13 16:35
Yeah I am having understanding the question too.
If X is paying fixed - X pays 6% of 1mn ie 60K, whereas if it pays floating it pays 5.25% of 1mn - 52500. And jblamb is correct, the money exchange should be ideally only the difference in interest rates.作者: dotamasta 时间: 2011-7-13 16:35
Swap tenor: 10 years
Notional principal: $1,000,000
LIBOR0: 4.75%
I think this is the actual format of the question. With X's terms on one side and Y's terms on the other
ie. CP is right
Edited 1 time(s). Last edit at Sunday, October 25, 2009 at 01:39PM by jblamb.作者: disiz64 时间: 2011-7-13 16:35
Is this question possible in real life given that we use beginning floating rate and ending fixed rate to compute the difference? We would not know the ending fixed rate!作者: rkapoor 时间: 2011-7-13 16:35
I also have problem at understanding the question. Could you please cite the source of that question?
