Long / Short Position in Swap

I’m just going off how it is on the tests, not in real life.

Hmm, I normally associated the long side of a transaction as being the side that receives a certain amount of something.

billwest, in level 2 materials, from last year the funny thing is that one paragraph below, they sort of say “well, although almost nobody uses this terminology”…

i recall seeing it in the l3 material yesterday night…that’s what got into my head anyway.

found on another website that long swap does appear to be opposite of other securities (i.e. bonds) and that a long swap hedges a long bond (where long swap = pay fixed)

F@$%! I need to find this in the curriculum. It just seems counterintuitive to me.

Im going with… PAY FIXED = LONG Who’s with me??

Bill.S.Preston,Esq Wrote: ------------------------------------------------------- > Im going with… > > > > > > > > PAY FIXED = LONG > > > > > Who’s with me?? I AM

ditto. the entire framework of my understanding of the L3 material rests on this assumption. too late to undo it now…

me too i know it’s in the curricularlum…i saw it last night!

It depends on your perspective. If you are paying fixed you are long the interest rate, however you are short the bond that you are hedging. Hope I didnt confuse you’ll more :slight_smile: As far as duration is considered, i think if you are receiving fixed, you are long the bond and a + ve duration. If you are paying fixed, -ve duration. Any comments!!

Here’s how I see it: If you take the floating side, it implies you are expecting rates to go down - you are short rates… Recieve fixed and pay floating is SHORT and vice-versa!!!

This is a case of the right way and the CFA way. All my coworkers say that receive fixed is the long side.

In the galaxy question on the Mock, wasn’t galaxy in a receive fixed/pay float swap to hedge their exposure on the FRN they bought? Then in the answers it says that Galaxy is long the swap and it has positive MV so they face the credit risk…This is getting silly… Anyone remember that question?

See my Thread…it did state tehy were LONG the swap even though if it wasn’t a typo they were Paying Floating and Receiving Fixed which would be SHORT, but the only thing I’m banking on is that they F’d up somewhere, but it did state they were LONG the swap. So that is why its the answer that it is.

Where’s Volkovv - he would be able to clear this mess up for us. Volkovv - come to our rescue!

Willy, it said they were long the swap in the question? I def missed that if they did. If that was given in the question then I understand the logic to get to the answer. I better read more carefully on game day. That is def a huge part of getting these answers right

Yes it did, 100% sure on it.

I would say that you are long the swap if you are paying fixed/receiving floating. I would also say that I would almost certainly clarify with anybody who told me they were long an interest rate swap. CFAI isn’t going to leave you guessing but will be clear on who is doing what. Everyone just calm down.