Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OISswap with two years to maturity where you receive 3% and pay the floating reference ratewith principal 1 million. If the payments are made annually with annual compounding, what is the value of the swap
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Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OIS
swap with two years to maturity where you receive 3% and pay the floating reference rate
with principal 1 million. If the payments are made annually with annual compounding, what is the value of the swap
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- Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OIS swap with two years to maturity where you receive 3% and pay the floating reference rate with principal 1 million. If the payments are made annually with annual compounding the value of the swap is (a)−558.4 (b)−188.5 (c) 0 (d) 188.5 (e) 558.4Let's imagine that the OIS rates for one year and two years are 2% and 4% respectively. Now, let's examine an OIS swap set to mature in two years, where you receive a fixed rate of 3% and pay the floating reference rate. The principal amount involved is 1 million. If payments are made annually with annual compounding, what is the value of the swap? (a)−558.4 (b) −188.5 (c) 0 (d)188.5 (e) 558.4Suppose the three-year swap rate for a swap with annual payments is 3.2% and that OIS (risk-free) zero rates for maturities of one, two and three years are 2.5%, 2.7% and 2.9% respectively. What is the value of a three-year swap where 4% is received and TSOFR is paid on a principal of $100 million? All rates are annually compounded.
- Assume oat forward prices over the next 3 years are $2.30, $2.40, and $2.33, respectively. Effective annual interest rates over the same period are 5.5%, 5.8%, and 6.1%. What is the 3-year swap price if the delivery in year 1 is 100,000 bushels, the delivery in year 2 is 125,000 bushels and the delivery in year 3 is 175,000 bushels?Your firm has semi-annual floating rate payment obligations for the next two years computed on a nominal value of $10M. You observe the following LIBOR spot rates: 6 months = 1.5%, 12 months = 2%, 18 months =2.2%, 24 months=2.5%. Find the swap fixed rate. How would you use the swap in order to hedge your position (floating rate payment obligations)?Suppose that a bank has agreed to the following terms of an interest rate swap:- The notional principal is CAD 300 million and the remaining life of the swap is 11 months.- The bank pays 8% per annum, and receives three-month LIBOR.- Payments are exchanged every three months.- The swap (fixed) rate is 11% per annum for all maturities.- The three-month LIBOR rate a month ago was 12.5% per annum. All rates are compounded quarterly. Estimate the value of the swap using a) a bond-price valuation method, and b) a FRAs-based method?
- Suppose we are pricing a five-year Libor-based interest rate swap with annual resets (30/360 day count). The estimated present value factors are given below: Maturity(years) Present ValueFactors1 0.9900992 0.9778763 0.9651364 0.9515295 0.937467 What is the fixed rate of the swap? Answer in 4 decimal placesIf you are the floating-rate payer in an interest rate swap, paying LIBOR + 40bp with a notional value of $1,000,000 and LIBOR turns out to be 0.72%, 0.83%, 0.91% and 1.03% at the four annual payment dates, what are your dollar payment obligations at those dates?Suppose you have a 2.5-year remaining on an interest rate swap with a notionalprincipal of $10, 000, 000 between Company A and Company B. Company A pays fixed rateand Company B pays the float rate. Fixed and float payments are exchanged every year andthe last payment was exchanged 6 months ago. The fixed rate is 3.5% per annum, and thefloating rate is tied to the annual LIBOR. The previous 1-year LIBOR rate, set 6 months ago,is 2.75%, 6 month LIBOR is 3.25%. the 1.5-year LIBOR is 3.25%, and the 2.5-year LIBOR is3.50%.Calculate the present value of the fixed and floating legs of the swap, and determine the swap’snet present value from Company A’s perspective. Assume annual compounding for discounting.
- You are trying to buy an interest rate swap that will give you floating LIBOR interest for the next 3 years. The notional principal is $100,000 and the settlement is annual. If the annual LIBOR forward rates for the next three years are such that f0,1 = 3%, f1,2 = 3.5% and f2,3 = 4% (fx,y = forward rates between year x and y), determine the fixed rate of this interest rate swap. (Note: Fixed rate in an interest rate swap is a choice variable as in this case. You can buy an interest rate swap as a speculator without having any assets.)Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5% and a floating rate of 90-day LondonInterbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3% and the current forward ratesfor the next four quarters are 3.2%, 3.6%, 3.8%, and 4%. If these rates are actually realized, at the second quarterlysettlement date, the fixed-rate payer in the swap will:a. receive a payment of $5,000b. receive a payment of $5,000c. receive a payment of $7,500d. neither make nor receive a paymentSuppose that oil forward prices for 1 year, 2 years, and 3 years are $109, $128, and $134 per barrel. The 1-year effective annual interest rate is 3.9%, the 2-year interest rate is 4.6%, and the 3-year interest rate is 4.9%. What is the fixed per-barrel price in a 3-year swap that calls for delivery of 4 barrels of oil at the end of the first year, barrels the second year, and 2 barrels the third year? Answers: a. $111.42 b. $154.43 c $112.66 d.$123.23 e. $120.46
