Is the solution to this swap example from the q&a bank (6.10) correct? It looks like the 2 companies end up with the opposite cash flows to the ones the question described they wanted. I'm looking at the 2009 version so 2010 may be different but I didn't see anything about it in the upgrade pack.
Hi. The solution is correct. UPX wishes to end up borrowing in euros. It takes out a £ loan which it then swaps through the bank. The £ cashflows cancel out leaving it with euros. (Note that the arrows in the solution show the direction of the interest payments, not the capital, which will go the other way).