Pricing and Valuation of Interest Rate and Other Swaps
Free CFA Level I lesson in Derivatives. 10 min read, ~1,535 words.
A swap is a portfolio of OFF-market forwards sharing one fixed rate (not a strip of at-market forwards); their values net to zero at initiation. Swap price (the fixed rate) is set at initiation so PV(fixed leg) = PV(floating leg), making value zero on day one. The swap rate solves...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- pricing and valuation of swaps
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