The CFAI answer is “The market value is positive and since Galaxy is long the swap, Galaxy has the market value of the swap at risk if the counterparty defaults.” Wasn’t galaxy short the swap ? As in they purchased a floating rate note and entered into a swap to turn the floating rate to a fixed rate. Therefore, the swap has to be pay floating recieve fixed…i.e., short the swap. Where am I wrong ?
Galaxy was long and the value is positive, so she has the risk.
fsasucker i agree with you. i thought that they bought a floating rate note initially and converted it to a get fixed by paying the float. however, for some reason the next sentence said that they were long the swap. maybe that’s how they define long/short a swap. JDV said something about CFAI will give the defn of long/short swap so don’t worry about it.
Didn’t Galaxy own a floating note and swap it for a fixed rate ? And is long swap = pay fixed recieve floating ?
that was already discussed apparently it’s a typo