Determining the net cash flow of a pay fixed/receive floating swap

CFA Level III Derivatives
#1

Why is the floating rate determined from the previous quarter and not the rate for the current time period?

#2

That’s the convention for any floating-rate payment.

The rate on a floating-rate bond is set in advance (by the rate at the beginning of the period) and paid in arrears (at the end of the period).

The payoff on a cap or a floor is determined in advance (with the rate at the beginning of the period) and paid in arrears (at the end of the period).

So it is with all floating-rate payments. Including the floating-rate leg of a swap.

#3

It’s determined in the current period, to be payed at the next due date.

#4

Ok thanks

#5

You’re welcome.