does receiving fixed cash flow in SWAP only has price risk?
does paying float in SWAP only has Cash flow risk?
Does asset markability risk only happens when interest rate goes up, bond price decrease?
Does cap risk only happens when interest rate goes up, portfolio value decrease?
can anyone share your opinion?
i try my best:
receiving fixed: has price risk
paying float is the same as receiving fixed: still price risk.
I would guess that only when you receive float, you have cash flow risk? (needs confirmation)
asset marketability: this one i am not sure. isn’t it sort of liquidity risk for which reason an asset can only be sold with a loss?
Cap risk: present when interest rate goes up. so yes OP is right.
in schweser mock exam, it says as long as it is related to fixed (regardless of receiving or paying), it is subjected to price risk, I’m not sure. anyone can correct me
it does make sense. but if that is the case, then as soon as Company enters a plain vanella swap, it automatically assumes price risk AND cash flow risk simultaneously.
Can this be right??