The only thing in the entire L2 curriculum I can’t wrap my mind around are swaps. Does any one have any quick and dirty tricks for learning how to calculate these? Thanks! Lux.
Timelines are essential. Learn to use it to value a swap and they will become the easiest things on the exam.
A swap is a portfolio consisting of a fixed rate bond and a floating rate bond. To value the swap, the key is to remember the floating rate bond is worth par at reset dates and the fixed rate bond is valued the usual way.
The attached post may help. http://www.analystforum.com/phorums/read.php?12,749056,750229#msg-750229
That guy can explain some stuff. Look for his post on valuing FRAs too.