Was it he had to long a receiver swaption? Other options were long payer swaption, short receiver swaption and short payer swaption?
This question sucked. I thought he wanted to hedge his current swap where he was the float rate payer/fix rate receiver b/c he received noticed that he was to receive $100K on August 14th due to the decline in rates). In order to cover his butt, he had to become a fix rate payer. I guessed on this, so don’t think my answer is 100% right. Also do you remember if you go 120,000 for one of the answers. (Rates fell from 4.25 to 4.13?)
i chose 120 also but not sure if its right. rates fell but don’t you have o discount it back , i tried but was getting around 119 and other answer was 117 so it sucked
No, you have to multiply each payment (interest savings of 30k) by the appropriate discount rate. The correct answer was 117.
i agree it should be 117.
I got 120 with my calculations and then just looked to see if there was an answer that would discount it to save time. I put 117.
Did the same vignette ask the 360 rate on the swap? showed 4.70 as in table but with the discount factors was 4.6