I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate with notional of 100\$. At initiation, the swap should be valued at 0\$, as both the fixed leg and the floating leg of the swap should have the same value.
If I valuate the receiver swap a month later and it would have a value of let's say 2\$, then how should I calculate the return? Is it just (2\$ - 0\$) / 100\$, i.e. change of swap value relative to the notional? I can't quite figure out how I could calculate the return by comparing change of value to previous value (or simply comparing consecutive values), as they can be at initiation 0\$ and later be negative.
If the correct way is indeed to calculate returns relative to notional, then why is this? After all, I am not investing any capital on the swap (apart from some possible margin payments), so why should I use the notional in return calculations? For me a more natural way would simply be following the value of the swap and calculating the returns with consecutive values, but then I face the problems of negative values and zero values mentioned above.