Hypothetically, I want to offer a fixed interest rate swap on a asset that currently has a variable rate. This variable rate is somewhat volatile.

How would I derive the fixed rate I should offer?

  • 1
    $\begingroup$ Hi & welcome. As with any other (at least "regular") swap, you would set your fixed rate at par, meaning that the present value of this fixed interest rate stream should be equal to the PV of the "variable rate / asset stream". Now, how you set it exactly, depends very much on the asset you are referring to and the projected cashflows you can generate from this variable rate... Can you give a little more details, i.e. what asset is it exactly and how is the variable rate determined, how often does it reset, etc.? $\endgroup$
    – KevinT
    Apr 13 at 6:26


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.