Hey guys ,
Just started with the fixed income readings ( hateing it ! never liked FI) , and came across the LOS on swa rate curve , where we can clculate the Swap Fixed rate using the formula :
ΣSFR/(1+s)+ 1/(1/s) … to the power of T .
now the question here is , is ther a way to do it using a calc ?
I’m not sure where you got that formula. And there’s a typo.
Take a look at the article I wrote on valuing plain vanilla interest rate swaps: http://financialexamhelp123.com/pricing-plain-vanilla-interest-rate-swaps/
Note that they’ll most likely give you the present value factors on the exam.
Thanks S2000 , I havent really reached swpas reading (rather skipped it for now ) . Came across this in valuation of Fied income in the reading on term structure and intrest rate dynamics .
in that we have an LOS on swap spread and swpa curve/swpa yeild curve .
Anywyas , I went through ur site , as usual . its awesome ! finally understood the concept more clearly .
regarding the PV of the swap rates . well as of now , i am fully confused , just started serious preperation 1-2 days back , i guess ill know only once i start solving the sums .
Thanks as always ,
Yet the practice problems in the curriculum make you crank them out, usually with no less than 4 rates, both for the fixed rate at initiation and value at a future point in time. I mean, I get it, practice helps reinforce the theory and method of calculation, but man, that’s a lot of writing and button presses just for practice. Anyhoo, a bit of venting since I happen to be working on the swaps reading right now and spent 3 hours just on practice problems 1-5 this morning heh.
the correct formula for fixed rate in swaps is
(1-Dn) / (D1 + D2 + … Dn)
Where Di is the discount factor