Transcription of INTEREST RATE SWAPS - NYU
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INTEREST RATE SWAPS - NYU
INTEREST RATE SWAPSS eptember 19992 INTEREST RATE SWAPSD efinition: Transfer of INTEREST rate streams without transferring underlying FOR FLOATING SWAPSome DefinitionsNotational Principal:The dollar the INTEREST rates apply Period: Period over which the coupon is tradition fixed rate payer has sold swap, floating rate payer has bought fixed for floating pays B 8% pays A six-month T bill rate + 2% three Principal one millionPERIODT-BILL RATE A B 0 4 1 330,00040,000 2 425,00040,000 3 530,00040,000 4 735,00040,000 5 845,00040,000 650,00040,0005 SOME VALUATION PRINCIPALSI gnore risk for momentAlthough principal not traded equivalent to selling afixed for floating bond of one million since this onemillion cancels initiation, both sides must be happy.
INTEREST RATE SWAPS September 1999. 2 INTEREST RATE SWAPS Definition: Transfer of interest rate streams without transferring underlying debt. 3 FIXED FOR FLOATING SWAP Some Definitions Notational Principal: The dollar the interest rates apply to. Reset Period: Period over which the
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