Pay swap

CFA Level III
#1

I thought that ‘pay swap’ means long pays fixed, receives floating. However, in a question where they enter a pay swap, they receive fixed. How come?

#2

can’t be, pay swap means pay fixed and receive floating

#3

You’re right that long pays fixed, but I haven’t seen the term “pay swap”. Maybe you’re thinking “payer swaption” which is an option to enter a swap as the pay fixed party? PS. where were you on the pension time horizon debate? I could’ve used your help

#4

What are the odds on volkovv passing this exam? I’d be giving up 40:1 and betting on this guy - a lock unless he gets sick or something…

#5

I’d be giving 2:3 of volkov vs me passing

#6

You’re going to pass too.

#7

and will still be stuck writing code :-/ thanks for the confidence though, it means a lot coming from you

#8

Joey, thanks for kind words :slight_smile: I still have lots of reviewing to do to feel comfortable. TooOld, I didn’t have time to get on AF yesterday, I’ll try to find that thread and see if I can add anything.

#9

I ran into this in the Schweser book 1 Exam 2. They said they would enter into a “pay swap” and I answered the question assuming that they were paying fixed. I got the question wrong since they assumed they were paying float. For example, I have a fixed obligation and I enter into a ‘pay swap’ to hedge against rates. I was thinking, ‘totally wrong, they would have two fixed obligations…’.

#10

dupe

#11

…

#12

Pay Swap means paying fixed… This just in: There is an errata entry on this item. Check Schweser website. It states that the paragraph should have stated ‘pay float swap’. I want my points back!

#13

ymmt, i just reread the question and you are correct, they say pay fixed to benefit from declining rates and that is wrong. For some reason when i was reviewing this question i conditioned that schweser was right and i was wrong :slight_smile:

#14

volkovv, I actually meant that PS for needhelp, he calls himself a pension guru, so I just wanted his thoughts. If you want to wade through a 39-post string too, be my guest.

#15

Sorry I was busy studying. Ok in Schweser Exam 2 Afternoon session the term used is ‘pay swap’ and the long is NOT paying fixed. It had me utterly confused.

#16

TooOld4This Wrote: ------------------------------------------------------- > You’re right that long pays fixed, but I haven’t > seen the term “pay swap”. Maybe you’re thinking > “payer swaption” which is an option to enter a > swap as the pay fixed party? > > PS. where were you on the pension time horizon > debate? I could’ve used your help I will get to it momentarily.