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Swap Pricing

Banks generally use par swap or zero-coupon swap pricing, which is discussed in detail in the next section. This section introduces the subject with an intuitive swap valuation description. [Pg.138]

Consider a vanilla interest-rate swap with a notional principal of M that pays n payments during its life, to a maturity date of T. The date of each payment is on ti with f=l,. . . n. The present value today of a future payment is denoted by PV 0, t). If the swap rate is r, the value of the fixed-leg payments given by (7.2) below. [Pg.138]

The swap valuation is equal to Pyfioat, The swap rate quoted by a [Pg.138]


Bond Price Swap Price Swap Rate( Redeu-uti ji (i)... [Pg.6]

The cash flows of a typical credit default swap are set out in Exhibit 21.1. Exhibit 21.2 shows the Bloomberg screen CDS for credit default swap prices. [Pg.655]

The asset swap price (i.e., spread) on this bond has the following components ... [Pg.683]

See Moorad Choudhry, Issues in the Asset Swap Pricing of Credit Default Swaps, in Frank J. Fabozzi (editor), Professional Perspectives on Fixed Income Portfolio Management Volume 4 (Hoboken, NJ John Wiley Sons, Inc., 2003). [Pg.685]

As explained in chapter 3, zero-coupon, or spot, rates are true interest rates for their particular terms to maturity. In zero-coupon swap pricing, a bank views every swap, even the most complex, as a series of cash flows. The zero-coupon rate for the term from the present to a cash flows payment date can be used to derive the present value of the cash flow. The sum of these present values is the value of the swap. [Pg.113]

Asset-swap pricing is commonly applied to credit-default swaps, especially by risk management departments seeking to price the transactions held on credit traders book. A par asset swap typically combines an interest rate swap with the sale of an asset, such as a fixed-rate corporate bond, at par and with no interest accrued. The coupon on the bond is paid in return for LIBOR plus, if necessary, a spread, known as the asset-swap spread. This spread is the price of the asset swap. It is a function of the credit risk of the underlying asset. That makes it suitable as the basis for the price payable on a credit default swap written on that asset. [Pg.187]

Grinblatt, M., and N. Jegadeesh. 2000. Futures vs. Forward Prices Implications for Swap Pricing and Derivatives Valuation. In Jegadeesh, N., and B. Tuckman, eds. Advanced Fixed-Income Valuation Tools. New York John Wiley Sons. [Pg.337]

Bloomberg users can use screen VCDS to obtain a CDS-price implied bond valuation, which can be compared to the actual market-observed asset swap price for a bond. This can then be used as a measure of relative value. [Pg.217]

IrBond Price Swap Price 2 Swap Rate Redenption Preaiua... [Pg.218]

The market approach to CDS pricing adopts the same no-arbitrage concept that is used in interest rate swap pricing. This states that, at inception ... [Pg.220]

Return from a holding of fixed-income securities may be measured in more than one way. The most common approach is to consider the asset-swap spread. More sophisticated investors also consider the basis spread between the cash bond and the same-name credit default swap price, which is known as the basis. In this chapter we consider the most accessible way to measure bond return. [Pg.429]


See other pages where Swap Pricing is mentioned: [Pg.716]    [Pg.105]    [Pg.121]    [Pg.187]    [Pg.131]    [Pg.138]    [Pg.148]    [Pg.219]   


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Asset-Swap Pricing

Credit default swaps pricing

Interest rate swaps pricing

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Swaps asset-swap pricing

Total return swaps pricing

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