Valuation of Swaps, Currency Swap von Edu Pristine

Dozent des Vortrages Valuation of Swaps, Currency Swap

Edu Pristine

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... an example in which the swap lasts for n years. If the payments are made at the end of each year then: -If the principal is exchanged between the 2 parties at the end of the swap, then Party 1's cash flow suggests that it’s long a fixed rate bond and short ...

... For payment at time t, the rate used is the rate for the period ...

... to be specified and it is exchanged in the beginning as well as the end of the swap. Consider a currency swap between party 1 and 2. In this case Party 1 is in US and can borrow in USD and party 2 is in Australia ...

... there is an exchange of principal in IRS. C. The counterparty in an IRS needs to consider fluctuation in exchange rates, while currency swap counterparties are only exposed to fluctuations in interest rates. ...

... Hence we can say that he is long a rupee bond and short an AUD bond: -The value of the swap will be the difference in the PV of the bonds V swap = B Rs– S 0B AUD. -Where: S0 is the current spot exchange rate between Rs ...

... 7% per annum in AUD and receives 3% per annum in US$. The principal in the US is 10 million USD and that in Australia is 11 million AUD. ...

... 5 Time Cash Flow ($), Present Value Cash Flow (AUD), Present Value ...

... losses from a swap are much less than losses from defaults on a loan with the same principal. Potential losses ...

... In an amortizing swap the principal amount reduces in a predetermined amortization rate. In a step up swap the principal increases in a predetermined way. In Credit Default Swaps (CDS) the buyer of the swaps pays premium to the seller of the swap till the time the underlying does not default. If the underlying defaults, then the seller of the swap makes a payment to the buyer and the CDS is terminated. ...

... fixed-rate leg and receive the floating-rate leg of a plain vanilla interest-rate swap, c.) Pay the floating-rate leg and pay the fixed-rate leg ...

... to be specified and it is exchanged in the beginning as well as the end of the swap. Consider a currency swap between party 1 and 2. In this case party 1 is in US and can borrow in USD and party 2 is in Australia and can ...

... there is an exchange of principal in IRS. c) The counterparty in an IRS needs to consider fluctuation in exchange rates, while currency swap counterparties are only exposed to fluctuations in interest rates. d) Currency swaps ...

... in AUDs. Hence we can say that he is long on rupee bond and short on AUD bond - The value of the swap will be the difference in the PV of the bonds ...

... 7% per annum in AUD and receives 3% per annum in USD. The principal in the US is 10 million USD and that in Australia is 11 million AUD. Payments are exchanged each year ...

... of bonds (millions): 51 Time Cash Flow ($) Present Value - Cash Flow (AUD) Present Value ...

... losses from a swap are much less than losses from defaults on a loan with the same principal potential losses ...

... In an amortizing swap the principal amount reduces in a predetermined amortization rate. In a step up swap the principal increases in a predetermined way. In Credit Default Swaps (CDS) the buyer of the swaps pays premium to the seller of the swap till the time the underlying does not default. If the underlying defaults then the seller of the swap makes a payment to the buyer and the CDS is terminated. In a compounding ...

... leg and receive the floating-rate leg of a plain vanilla interest-rate swap c) Pay the floating-rate leg and pay the fixed-rate leg of a plain vanilla interest-rate ...