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No, he just gets less than the prior floating payment. Suppose you are on the fixed pay side of an inflation swap for \$100 quarterly. In the first quarter inflation is 1%, so you get \$101 and pay \$100. In the second quarter, inflation is -2%, so you'd get 98% of \$101, or \$98.98 and pay \$100. But that's the point of an inflation swap: to remove the ...


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Futures are in "zero net supply", or "for every long there is a short", which means that at any time there are investors who are long a certain number of contracts and other investors who are short an (exactly matching!) number of contracts. This number is called the Open Interest. It starts at zero when the exchange introduces a new contract (like Sep 2019 ...


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It is generally the case that warrants are issued on securities for which there are not liquid option alternatives. For pretty much the reasons implicit in the original question! So - usually - warrants exist on more illiquid underlyings. Else they start their life as longer-dated options on liquid securities, where listed options don’t have liquidity ...


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two reasons might be: 1.) Usually, warrants are not traded on exchanges but only issued by a company. So if you want to sell/buy warrants you have to accept the prices which are quoted by the issuer and his pricing might be less obvious. 2.) Warrants typically give you access to newly issued stocks, which causes dilution whereas options refer to already ...


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Let $r(s)$ be the process of a short rate. Then, by risk neutral pricing, $$ P(t,T) = \mathbb{E}^\mathbb{Q}\left[ \exp\left( -\int_t^T r(s)\mathrm{d}s\right) \Bigg| \mathcal{F}_t\right].$$ Thus, the zero-coupon bond is determined completely by the short rate process. Here, $P(t,T)$ denotes the time $t$ price of a zero-coupon bond maturing at time $T$. You ...


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Will a coupon rate be always involved in the asset leg? Absolutely. That's what makes it a TRS. The coupon is the price for the return of the asset. Without that coupon the TRS buyer would not receive any return and just be paying interest for no reason. And more importantly why is forward cash flows and discounting not done? It usually is ...


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I think this is the old accrual methodology, historically used for the banking book. I believe it is not market standard anymore and regulators require an MTM (mark-to-market) valuation. Here is an article that explains the difference between the two. And someone wrote a more mathematical paper, which should help you better understand the accrual valuation (...


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A forward rate agreement is an agreement to exchange a fixed for a floating rate over one period, with the payment being made at the start of the period. A zero coupon swap (with both legs paid at maturity) is an agreement to exchange a fixed for floating rate over one or more periods, with the payments being made at the end of the final period. So the two ...


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If I understand the question correctly, you have the implied vol by delta, and you would like to calculate the price using the Black Scholes formula. And I assume you know the other inputs-e.g., underlying price, interest rate and maturity. Very typical problem in the FX world, so what you can do is first convert delta (using the other inputs and vol) to ...


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