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Interest Rate Swap

Exchanges fixed for floating rate payments over the life of the swap.
  • At inception, the value of a swap is 0.
  • After inception, the value for the swap is the difference b/w the PV of the remaining fixed & floating rate payments.
  • Value of a swap to pay fixed = Bfloat - Bfixed
  • Value of a swap to receive fixed = Bfixed - Bfloat

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