I seem to be completely backwards… thought pay fixed is always long swap so if value is negative counterparty has credit risk on mock I thought you were a pay floating with a positive swap value …doesn’t that mean you are short and positive value means counterparty has risk? …answer said you are long and hold credit risk any help please!!
If you are talking about that sample exam 2 question, I think the key is that the market value is from the perspective of the fixed payer. Since the MV is negative, the fixed payer owes the fixed receiver and the fixed receiver has the credit risk.
sickel2 Wrote: ------------------------------------------------------- > If you are talking about that sample exam 2 > question, I think the key is that the market value > is from the perspective of the fixed payer. > Since the MV is negative, the fixed payer owes the > fixed receiver and the fixed receiver has the > credit risk. no he is talking about mock exam where it is reversed )
i posted on this question yesterday (correcting bigwilly’s typo), the responce was to Sample #2 but it should be applicable to the mock (which I haven’t taken yet) http://www.analystforum.com/phorums/read.php?13,742644
volkovv in mock they say “We are going long on IR swap by paying floating and receving fixed” WHICH IS INCORRECT.
Still confused…
Here’s my take on CFAI on their SWAP conventions: If the first word is PAYING your LONG If the First Word is Receiving YOUR SHORT I know its weird but I think the above might just hold up, just not in the court of law 
i think i agree with Bigwilly …whenever you are paying/buying you are long …
bigwilly Wrote: ------------------------------------------------------- > Here’s my take on CFAI on their SWAP conventions: > > If the first word is PAYING your LONG > If the First Word is Receiving YOUR SHORT > > I know its weird but I think the above might just > hold up, just not in the court of law i just make take it as a rule FOR CFAI EXAM ONLY
if this is the case, I’ll follow it too but I agree with csk, its plainly wrong, in a swap you are long interest if you are receiving floating you are long and if you are paying floating you are short
volkovv Wrote: ------------------------------------------------------- > if this is the case, I’ll follow it too > > but I agree with csk, its plainly wrong, in a swap > you are long interest > > if you are receiving floating you are long and if > you are paying floating you are short but but CFAI and real life is the same! Come on, dont turn your back on CFAI now