i spent the whole day on swaps today. i think i finally have down interest rate and equity swaps but just do not have it for currency swaps. can any of you share if you recall currency swaps being on the level 2 exam? i mean i can find the fixed rate, answer some not too difficult questions about what the payment would be at a certain year, but certainly cannot vlaue them. i figure if you guys tell me that i can expect to see 1 and at most 2 questions on it, i will think that it is not worth dwelling on the area as there are many others to attend to now. thank you and good luck.
I can’t remember if they showed up last year, I know I had problems with them too. Don’t skip them, take some time to get it clear in your head.
Ok, currency swaps: Same as interest rate swaps only you substitute the forward interest rates with forward currency rates. AND To get the notional principal, you convert what you’re given to the other currency @ the spot rate. Apply each country’s swap rate to the appropriate notional principal. Usually you swap notional principals, but you don’t have to. To create dual currency debt, you do NOT exchange notional principal (L3 topic). Swaps will probably be tested, since CFAI LOVES swaps. If you can get the calcs down, these are easy points because the topic is very black and white.
this is tricky… schweser dont have enough example in the notes, you ll have to refer back to CFAI text… do a few examples, and u ll be fine
realistic to see more than one quesstion on the whole exam that asks to value a currency swap?
probably not. ^