Long / Short Position in Swap

CFA Level III
#1

Can someone clarify the long position and short position in a Swap?

#2

receive fix is long receive floating is short this is analogous the duration of a swap. receive fix has a positive duration. receive floating has a negative duration.

#3

Got it - that’s what I figured. If you receive fixed, you have positive duration, so you are long. If you pay fixed, you have negative duration, so you are short.

#4

NO!!! Pay fixed - long (you are going Long interest rate) That is what wiki says. Mock exam says something weired

#5

http://en.wikipedia.org/wiki/Interest_rate_swaps

#6

no way…pay fixed = long

#7

Pay Fixed = Long Recieve Fixed = Short

#8

page 220, level 2 cfa book, volume 6: (don´t freak out looking for this year books, I am talking a book of last year level 2) “in swaps in which one party receives a floating rate and the other receives a fixed rate, the former is usually said to be long and the latter is said to be short. this usage is in keeping with the fact that parties who go long in other instrument pay a known amount and receive a claim on an unknown amount”

#9

Are you guys sure?

#10

Holy crap I better get this right on exam day.

#11

Pay Floating, Receive Fixed = Long, Short Pay Fixed, Receive Floating = Long, Short Receive Floating, Pay Fixed = Short, Long Received Fixed, Pay Floating = Short, Long I think i did that right, i dont know anymroe I’m fried.

#12

this just got more confusing …:-/

#13

I DONT GET IT

#14

so if your swap has negative duration, you are long?

#15

SSWWEEETTT

#16

These type of definition questions which have no basis in reality is really bothersome to me. My firm denotes Pay Fixed as short position FWIW. But back in CFA land - what the heck is correct?

#17

i’m sure pay fixed is long. you enter a swap to pay fix because you want to be protected against higher rates. when rates increase, pay fixed wins because it gets more from the floating payments. thus, pay fixed is long as it wins when rates go up.

#18

duration has nothing to do with long or short.

#19

I think we face 2 theories here: bigwilly = if it begins with “pay” = long, regardles of paying floating or fixed cfa text = if you pay fixed and receive floating, you are long sorry bigwilly, but I must disagree with you about this one

#20

hala, where did you find the reference in the cfai text?