Schweser test V1 - 1 Afternoon, question #48. Answer says Value of equity swap immediately after settlement = par value = $1. Why? I thought only the value of floating bonds resets to par after each settlement. Or the equity part of the swap should be considered as a floater (due to the constant change in value of the stock/index) ?
The value between settlement dates will vary depending on the current level of the index and the level of the index at the previous settlement date. At each settlement date it’ll equal its par value.