In CFAI Fixed Income, Reading 54, Pg. 231, regarding swap curves, it says: “By locking in 3-month LIBOR it is meant that a party that pays the floating rate (i.e., agrees to pay 3-month LIBOR) is locking in a borrowing rate; the party receiving the floating rate is locking in an amount to be received.” I thought it was the other way around? How is paying a floating rate “locking” anything in? I must be reading this wrong…
I would read it like this: “By locking in 3-month LIBOR it is meant that a party that pays the floating rate (i.e., agrees to pay 3-month LIBOR) *and receives the fixed rate* is locking in a borrowing rate; the party receiving the floating rate *and paying the fixed rate* is locking in an amount to be *paid*.” I think they should spell it out like that because we cannot always assume that the party that pays floating rate, automatically receives fixed rate, i.e., it could be receiving another floating rate, or something else.