Soln 3.11 part 3

Discussion in 'SA5' started by r_v.s, Nov 28, 2014.

  1. r_v.s

    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?
     
    r_v.s, Nov 28, 2014
    #1
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    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?
     
    Colin McKee, Dec 1, 2014
    #2
  3. r_v.s

    r_v.s Member

    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?
     
    Last edited by a moderator: Dec 6, 2014
    r_v.s, Dec 6, 2014
    #3

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