# long/short position in interest rate products

Is long-position in a floating-rate note lender？ (I thought it should be borrower)

2.Is long-position in a interest rate forward lender?

3.What is the duration of a long-position in a floating-rate note

Always confused with the long/short position in interest rate products.

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Here is a question that I took in the Qbank

Which of the following statements is most accurate? The duration of a long-position in a floating-rate note is:

A) close to zero and is unaffected by the addition of a receive-floating position in a swap. B) close to zero but increases with the addition of a pay-floating position in a swap. C) equal to its maturity but decreases to near zero with the addition of a pay-floating position in a swap.

Your answer: C was incorrect. The correct answer was B) close to zero but increases with the addition of a pay-floating position in a swap.

A floating-rate note’s value will be relatively stable because the payments vary with changes in the interest rates. For the long position (the lender), adding a pay-floating position will produce a synthetic fixed-rate position whose value will change with changes in interest rates.

1, The duration of a long-position in a floating-rate note is approximately = 0.5 times the maturity of the floating note(half of settlement period in swap). It’s usually very small, but it’s not zero probably because the interest is paid in arrears. So floating note still bears a small amount of interest rate risk.

2, The duration of a pay-fixed position in a swap is negative.

3, A pay-fixed position is the receive-floating position. The other leg is pay-floating position, whose duration is positive.

Don’t mix “long the interest rate” with “long a floating rate note”. The lenders long the floating notes.

Long Floating rate note - you will receive floating here. In swap you will pay fixed. So duration is less than zero

Swap - Pay-floating/receive- fixed. So duration increases

can’t be equal to zero.Swap : receive-fixed/pay-floating, duration increases