Timeline for Plain Vanilla Interest Rate Swap
Current License: CC BY-SA 3.0
3 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| May 13, 2021 at 11:07 | comment | added | Gabriele Pompa | Agree on everything, just in practice to hedge, the short position is held on a floating rate note (not in a zero-coupon bond), paying the previously resetted float rate underlying the swap and with the same payment schedule of the swap + principal redemption at $t_n$. This note, as is known, trades at par, that is: it's value at $t<t_0$ is $1 \times P(t,t_0)$ (assuming unitary notional). My two cents I guess | |
| Oct 18, 2019 at 11:27 | comment | added | Confounded | How can this be formulated in terms of the expectation in "risk neutral" (or equivalent) measure? I would have expected that $P^{Swap}_t = E[\sum D(t,t_i)\delta(T_{i-1},T_i)(L(t_i;T_{i-1},T_i) - K) | F_t]$ where $L(t_i,T_{i-1},T_i)$ is the floating index set (two days before) at time $T_{i-1}$ for the period from $T_{i-1}$ until $T_i$ and paid at time $t_i$, $D(t,t_i)$ is the discount factor from time $t$ to $t_i$, $\delta$ is the year fraction, and $F_t$ is the filtration up to time $t$? | |
| Feb 27, 2014 at 11:01 | history | answered | Probilitator | CC BY-SA 3.0 |