A Swap is...

CFA Level II
#1

equivalent to a series of… Can anybody state and explain it ?(ie bonds, options, fras)

#2

fixed and floating bonds the options then depend on what ur getnig: fixed or floating

#3

…a series of off-market FRA’s

#4

or FRA’s. or Options. The fun thing here is that you can replicate anything with anything. How much fun are we having???!

#5

too much fun yaahhhh

#6

florinpop Wrote: ------------------------------------------------------- > equivalent to a series of… Can anybody state and > explain it ?(ie bonds, options, fras) A) a f*cking ridiculous concept that I will never get my head around B) some sh!t that I don’t care about C) the one vignette that could seal my fate next Saturday D) all of the above

#7

FRA: The fixed rate of the swap being equivalent to the fixed rate of the FRA. There will be N-1 FRA involved with N being the number of payments (each payment would be a seperate FRA?) Bonds: If you are fixed payer then you issue a fixed rate bond and invest in a floating rate bond. Reverse for floating payer. Options: Hmmm… If you are the fixed rate payer then you would be long the interest rate so you would be long IR calls. Like buying a cap…but you would have to pay if interest rates went down so you would be short a put or short a floor. Reverse for other side.

#8

uhm yeah ok thanks

#9

mwvt9 Wrote: ------------------------------------------------------- > FRA: > The fixed rate of the swap being equivalent to the > fixed rate of the FRA. There will be N-1 FRA > involved with N being the number of payments (each > payment would be a seperate FRA?) > > Bonds: > If you are fixed payer then you issue a fixed rate > bond and invest in a floating rate bond. Reverse > for floating payer. > > Options: > Hmmm… > If you are the fixed rate payer then you would be > long the interest rate so you would be long IR > calls. Like buying a cap…but you would have to > pay if interest rates went down so you would be > short a put or short a floor. Reverse for other > side. yep makes sense took me more than I should have to understand this bastards

#10

Good job mwvt9.

#11

I’m so with zimzim…i screwed if/when swaps come up

#12

jeremyb… they are actually not that bad … there was a good thread here like 10 days ago that explained them really well