Just a question on IR SWAPs and the valuation under two scenarios.
If the question asks you, value the swap 100 days after initiation (i.e. not on a payment date),do you then find the PV of the remaining payments and principal and net them? Taking into consideration, the value of the floating rate side would just be 1+ floating rate, not the remaining payments.
When the question asks you to find the value of the swap on a payment date, let’s say the 1st payment date, do you only find the PV of those payments and net them? For example, 90 day fixed rate - 90 day floating rate x notional.
You find the new fixed rate from the new term structure, net it against the original fixed rate and bring the differences to present.
Can you elaborate? Which part are you referring to?
When valuing mid-term you have to calculate both fix payer and floating payer:
Fix payer will be swap rate x days/360 discounted back with the new IR term structure for the remaining payment dates + notional discounted back with the last IR.
Floating payer is the LIBOR rate pertaining that period you are in + notional discounted back with the first IR in the new term structure.
When you value at a payment date: the floating will be just the notional, while the fixed you calculate as above.
Swaps are much better explained in Schweser, I don’t even understand the notation of the curriculum, I don’t know what source you are using.