thepinkman Wrote: ------------------------------------------------------- > How do you get the pay variable using this method. > I got fixed as: > > .025( .9876+.9611)+.9611 = 1.0098 (Multiplied by > 10MM = 10,098,175) .024 (.9876) + .9876 = 1.0113 * 10MM = 10,113,024 (rounding error)
i lost it. so can i not play this one out like we did the first one? the first one was my friend. what is all of this craziness you just posted as the answer?
Here’s how I did that one: Floating 5,000,000*.037/2=92,500 92,500/1+(.034*(90/360)) = 91720.37 5,000,000/1+(.034*(90/360))=4,957,858 4,957,858+91,720 = 5,049,578 Fixed (767/760) * 5,000,000 = 5,046,052.63 5.049MM - 5.046MM = 3,526
bannisja Wrote: ------------------------------------------------------- > i lost it. so can i not play this one out like we > did the first one? the first one was my friend. > what is all of this craziness you just posted as > the answer? The schweser answer was crazy. I can’t do it like that. The floating calculation is the same as the one we did before. Equity is easy, just where you are today over where you started. I noticed you mis-typed the first floating payment above. It should be 92,500, not 95,200. You are spot on without that mistake.
OH MY GOD I AM A COMPLETE MORON! i used 95,200 not 92,500! so using 92500 the rest of my math was fine up top and i’d get 5,049,578 and change. 767/760 = 1.009211 x 5 mil = 5,046,052 difference is 3,526! last little part the pos/negative sign- so the floating guy PAYS the 5,049,578 and gets the 5,046,578 or is it the other way around. is the answer that the value to floaty dude is negative or positive? i think i owe you and this whole board tons of drinks for this. i am making a swaps breakthrough here.
Nice! 3526 is negative to the floating payer. He has to pay 5.049mm and only receives 5.046mm
Last one… Consider a semiannual equity swap based on an index at 985 and a fixed rate of 4.4%. 90 days after the initiation of the swap, the index is at 982 and London Interbank Offered Rate (LIBOR) is 4.6% for 90 days and 4.8% for 270 days. The value of the swap to the equity payer, based on a $2 million notional value is closest to: A) −$22,564. B) $22,314. C) $22,564. D) −$22,314.
I think the value to the equity payer is $22,564.
i am doing cartwheels right now (ok not literally) fixed- 44k/1. 046(90/360) + 2,044,000/ 1. 048(270/360) = 43,499.75284 + 1,972,972.973 = 2,016,472.726 is what fixed pays equity- 982/985 = .996954 x 2 mil = 1,993,908.629. so equity guy wins, fixed guy loses, amount is 22,564.09656 C! C!!! C!!! let’s tackle currency ones tomorrow not tonight. i want to bask in the glory of understanding this stuff for a night. YES!
way to go banny!!! i agree - currency swaps tomorrow night!
Awesome banny!!! I agree, let’s to currency tomorrow.
ozzy, This is a great help. I feel like I almost understand swaps now. So correct me if I am wrong. Fixed interest rate we have to look at both payments and discount by libor in effect at that time. With floater, we only look at the first payment, discount it by present libor and then discount 1 by present libor.
You got it, rekooh. The floating side should be worth par at the end of period one since the coupon adjusts to the market rate each subsequent period. At least that’s the way I think about it.
bannisja Wrote: ------------------------------------------------------- > i am doing cartwheels right now (ok not > literally) > > fixed- > > 44k/1. 046(90/360) + 2,044,000/ 1. 048(270/360) = > 43,499.75284 + 1,972,972.973 = > 2,016,472.726 is what fixed pays > > equity- > 982/985 = .996954 x 2 mil = 1,993,908.629. > > so equity guy wins, fixed guy loses, amount is > 22,564.09656 > > > C! C!!! C!!! let’s tackle currency ones > tomorrow not tonight. i want to bask in the glory > of understanding this stuff for a night. YES! Just a question, I don’t understand why its 44k interest and not 22K since the semi-annual fixed rate is 4.4%, dont you have to use 4.4/2 as the interest rate like we did for the other questions you posted in this thread?
deep2002, the notional amount is 2 million : 22k*2
It was difficult for me, however, I understood. Thanks, guys!
thank you all, I feel like I know swaps on a whole new personal level!
i still need to learn currency swaps. it’s on my list of “to do” stuff. now that i’m getting equity and plain vanilla ones right and actually look forward to those q’s on a test (funny how much can change in a few days), hopefully i can learn currency swaps soon and be on my way. oh, and i still have to memorize futures formulas and look over FRA’s again. this stuff never ends, does it?
I need to do currency swaps too. I’m clueless on them.
you guys are my turtors…I learned alot by the few ones you posted here - please ozzy help me learn…I thirst for more!