Looking at q 8 of 2009 essay, the computation for floating leg’s durations was 1/4/2 for a quarterly payment swap and 1/2/2 for a semianual. I would have expected the durations to be 1/4 and 1/2 because we have to wait 1/4 and 1/2 of the year (respectively) to get the payments. Where does the 2nd division by 2 come from? Thanks, Ed
For a floating rate, duration is normally between 0 and the payment period. In this case, we are taking the average.
Techincally duration on a floating rate note is the time up until the next coupon. However some questions such as this one, call for the average duration of the floating rate note. So you take the reset period/2, ie the av duration will be the mid-point in reset dates, which makes sense.