I feel i have a decent grasp on this material but was hoping someone could clarify or provide some additional context to the following:
“At initiation of the swap, the fixed rate is selected so that the PV of the floating-rate payments is equal to the PV of the fixed-rate payments, which means the swap value is zero to both parties”
I understand this is an underlying concept to not just swaps, but also forwards and futures…ha, so my grasp can’t be that good, right !?! I can solve for the fixed rate and value a swap, however I would just want to get someone elses take reagarding this.
Does this mean that the fixed/swap rate could be used to discount both the floating and fixed side and would result in the same value at initiation for both ??? Not seeing in the math how the fixed rate applies to the floating rate…
Thanks for any help!!!