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Soln 3.11 part 3

R

r_v.s

Member
despite the explanation I'm unable to understand how to go about the solution!! :( :eek:
Would you pls explain?
In the euro example given, isn't the factor (2%) the one that corresponds to outstanding term?
 
Hi, If this refers to Q&A Bank 3.11 (iii), the explanation is mainly about the results that were calculated in part (ii). The explanation simply states that the current method gives lower results, and also uses market values which are arguably better and more realistic for a swaps portfolio. Can you tell me which part of the solution you have problems with?
 
I am sorry maybe the title of my post was misleading!
I meant the question in the Part-3 Questions. The whole question not just (iii)!
:(

it says in the original exposure method, the factor for conversion is chosen from depending on the original term. But isnt the 2% in the Euro swap based on outstanding term? Or have I misunderstood the whole process?
 
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