Ok, here is my new attempt at IR SWAPS: If you are Paying Fixed, you are referred to as the “Payer” - Also used in Payer Swaption - Right to enter a Pay Fixed Swap If you are Receiving Fixed, you are referred to as the “Receiver” - Also used in Receiver Swaption - Right to enter a Receive Fixed Swap If you Pay Fixed you are Long If you Receive Fixed you are Short Duration of Pay Fixed, Receive Floating < 0 Duration of Receive Fixed, Pay Floating > 0 THAT IS IT. If someone has a CFAI Problem that counteracts above, then please post. This is what I’m gonna go with for the test. All in Favor?
please explain problem in mock exam
I concur with your assessment.
Ok, what number was it CSK again…
If #16, I have in my notes that the original Note was a Floating Rate note, so they would enter into a SWAP to Pay Fixed and Receive Floating = which is a LONG swap which they stated. So my above holds.
Also, the value was +47000, which is a Gain to the LONG side, which mean that the Long Party bears the Credit Risk. Case Closed. 
pay fixed = long, Isn’t this backwards? ahhhhhhhhhhhhhhhhhhhhhhhh
bigwilly Wrote: ------------------------------------------------------- > If #16, I have in my notes that the original Note > was a Floating Rate note, so they would enter into > a SWAP to Pay Fixed and Receive Floating = which > is a LONG swap which they stated. So my above > holds. it clearly stated that note was ISSUED
and they enter into receive floating pay fixed
Bigwilly, its perfect…end of discussion.
Maybe there’s a typo, b/c your right they did purchase it. But it did cleary state they were “LONG” in the sentance, so hence since it was a positive mkt value they had the credit risk
bigwilly Wrote: ------------------------------------------------------- > Maybe there’s a typo, b/c your right they did > purchase it. But it did cleary state they were > “LONG” in the sentance, so hence since it was a > positive mkt value they had the credit risk it probably was a typo. I just reread this question 10 times and still couldnt believe. Got it wrong of course.
Ok, I think I got it since you are receiving floating you are betting on interest rates to increase so you are long interest rate.
Slam dunk willy. Babbu says no more. Listen to Babbu or he will sit on you.
This whole thing is WACK! They better state who is Long/Short or make it very clear. But you’re right if they didnt state they were LONG you would assume they were SHORT b/c they were Paying Floating and Receiving Fixed based on the fact tehy supposedly Purchased a Floater (no not a dead body).
YOu should be able to report errors instantly during the review or something!
Dont be Silly Agree with bigWilly … … i took the same approach and i got than one right …the problem stated that they BOUGHT a FRN
i also distinctly remember reading that they converted the floating rate exposure associated with the note into fixed rate exposure by going long a 1-year interest rate swap with dealer
CSK, what does #23 sample 2 say? we should really put this to rest! mock definitely contradicts what we have said…thanks