Question #52
Reading: Reading 30 Pricing and Valuation of Forward Commitments
PDF File: Reading 30 Pricing and Valuation of Forward Commitments.pdf
Page: 21
Status: Unattempted
Question
Consider a 1-year semiannual equity swap based on an index at 985 and a fixed rate of 4.4%. 90 days after the initiation of the swap, the index is at 982 and MRR is 4.6% for 90 days and 4.8% for 270 days. The value of the swap to the equity payer, based on a $2 million notional value is closest to:
Answer Choices:
A. −$22,564
B. $22,314
C. $22,564
Explanation
Typesetting math: 100%
−$22,564 is the value to the fixed-rate payer, thus $22,564 is the value to the equity return
payer.