# Swap Duration

For a pay-floating counterparty, the duration of the swap will generally be less than the duration of the fixed-rate payment.

True/False?

I made mistake every time I saw it. This kind of question is purely for exam. (Notes B4, P248, Q8)

pay floating is receiving fixed.

Fixed side has a higher duration generally.

So they have + Large - Small.

Duration will increase for this party.

Now let me see the question being asked…

the duration of the swap will generally be less than the duration of the fixed-rate payment.

That statement is true. Duration of a Receive Fixed Pay Floating e.g. 2 Year Semi Annual Swap will be 0.75 * 2 - 0.5 * .5 = 1.25 (Positive) which is less than the duration of the fixed rate Payment of 1.5

CPK, I saw some example show the duration for fixed-payer equal to 0.75*…

Is that 0.75 is fixed? or that is a simple assumption for the examples?

Though I agree with your answer, but what happen if it is something like 0.9 and the floating quarterly reset…?

He receives the fixed payment , he pays the floating payment .

Sign of the receive-fixed is positive .

Sign of the swap is also positive .

Value of the swap is less than value of the fixed payment

1.both are positive

1. Swap is less in magnitude

3, So Swap is less algebraically.

So it is True

Sorry, my stupid ques,…duration of float counter alway less than fixed. But why they use generally?

truongdv - convention followed in the cfai curriculum is that the duration of a fixed side = 0.75 * Fixed Maturity (duration).