SWAP Floating payment

As far as i understood, and it makes perfect sense, the floating rate payment on a SWAP should, at each payment date be 1, or the 100 or 1000 whatever, the par value of a bond. If we need to value the floating rate payment between payments, then it will not have that par value. It will be (“last reset floating rate”+ 1)/ current structe of Libor…fine but then look at the CFAI book at page 267 (derivatives and portfolio management). In the problem, we are at t=payment date for floating, so theoretically, the floating should equal 1. But these twats did not make the floating payment=market rate…so this makes no sense as per Schwese explanation and the CFA book explanation (p244, 2nd paragraph after the discound facot calculations) thanks in advance guys

When we have moved sometime into the contract…the value of the floating rate is 1+the PV of the floating rate at the beginning of the contract or at the rate resetting period…does that help

Try asking that question again?

Csare, i know, but we are AT the payment date, so the floating should be equal to 1. Just check the actual example in the book. My question is " how is it that the floating rate payment is not 1 when we are at the reset date??"

What are you talking about “the floating should equal 1”? This “floating payment=market rate” doesn’t make sense unless rates are unchanged. The payment is netted and in arrears.

from schweser "the key is to reconize that at each settlement date, the coupon rate on the floating rate bond, which determines the coupon payment at the NEXT settlement date, is set to the market rate. That means that at every settlemment date the coupon rate on the bond is equal to the market rate, […]if the coupon rate on a bond is equal to the market rate, the bond sells at par. In this specific problem, we are at the settlment date, so the the floating rate portion of the bond should trade at par. My question is “how come it isint?”

Schweser’s statement seems correct to me. The floating rate portion of the bond does trade at par on settlement dates as Schweser is saying.

ok, now that we understand each other, would you be able to assume why in this specific exercise (p 267), where all these conditions are met, we are not trading at par?

How about some details on the exercise?