D
dimitris13
Member
Hi there,
i am reading some past papers and i see two "methods" for calculating the pv of floating payments in a swap.
Within the "quicker" method if the principal is L it says that we can say that it is L-L*Sumof Discount factors. Question 1: is this always the case irrespective of whether "I " pay the fixed or the floating leg?
Within an asset discussion (oct 2016 q5) it mentions
(Part 1)
that the swap value can be viewed as a FRN and fixed bond (so sth like Vswap=Vfixed-Vfloating)
and the pv of floating can be carried out more quickly if we use this info. there is some description ie about adding a notional payment at the end so we end up with a FRN
(part 2)
And it says: the value at any payment date will be equal to the nominal value. and if we deduct the value of the imaginary npominal payment from the nominal value we get the value of the interest payments alone.
I have two questions: 2. where we use the 1st sentence of Part 1
3. why if we do L-L*Sumof Discount factors equals the PV of floating payments ?
thanks
i am reading some past papers and i see two "methods" for calculating the pv of floating payments in a swap.
Within the "quicker" method if the principal is L it says that we can say that it is L-L*Sumof Discount factors. Question 1: is this always the case irrespective of whether "I " pay the fixed or the floating leg?
Within an asset discussion (oct 2016 q5) it mentions
(Part 1)
that the swap value can be viewed as a FRN and fixed bond (so sth like Vswap=Vfixed-Vfloating)
and the pv of floating can be carried out more quickly if we use this info. there is some description ie about adding a notional payment at the end so we end up with a FRN
(part 2)
And it says: the value at any payment date will be equal to the nominal value. and if we deduct the value of the imaginary npominal payment from the nominal value we get the value of the interest payments alone.
I have two questions: 2. where we use the 1st sentence of Part 1
3. why if we do L-L*Sumof Discount factors equals the PV of floating payments ?
thanks