the floating rate payer in a simple interest rate swap has a position that is equivalent to A. a series of long forward rate agreements B. issuing a floating rate bond and a series of long FRAs C. buying a floating rate bond and a series of short FRAs D a series of short FRAs

D. am i right?


B? Paying floating, and receiving fixed rates

I guess D

oh, oh, i’m counter kabhii…


I like B

I don’t think FRA=receive fixed rate…

D is the ans i choose B FRA suck as$

doworkson Wrote: ------------------------------------------------------- > oh, oh, i’m counter kabhii… I think when bond equivalence is seen you need to have a short (issued a ) floating bond and long a fixed bond When interest rates go up you lose in the swap as you pay more than fixed. In case of short FRA’s also you lose when the interest rate rises. Have not reviewed this for a while so might be wrong

Would it be correct to say that the fixed rate that the floating payer is receiving is incorporated into the strike price of the FRA? i.e. - the more you are receiving as fixed, the more interest rates have to rise before you lose as the floating payer. I think most of us made the same mistake of trying to account for both incoming and outgoing payments


Brilliant… now this is cemented in my head, thanks!

yeh…that makes sense now…