schwser notes4 P151 the values of commodity swaps and interest rate swaps change over time even if market rates and prices do not change. why?time value deterioate? thx
It’s true as the swap gets closer to its maturity. To find out the value of the swap 90 days prior to maturity you take the PV using a 90 day time value calculation. now let’s say 2 days prior to maturity, all else remains same, the value changes as the discounting period has gone down.
so swaps have time value.Are you sure about that? i know options have time value because they give you right to do sth . why swaps? thx
The discounting factor disappears over time.
Whenever you do a PV and FV calculation, time will always matter. By the way, anything that is consider to be a VARIABLE NOT a CONSTANT in any formula will always matter. Time varies as well right! And you know the longer you time to maturity, the lower you PV therefore by merely passage of time you swap value will change. Does that make sense?