2. Please refer to the spreadsheet titled ‘Ch15_Interest_Rate_Swap_Valuation.xlsm’ and the quotes in problem 1 above. Compute the fixed rate that equates the present value of floating payments and the fixed payments for a notional $50,000m.
Just question number 2
3 years ago
20
Ch15_Interest_Rate_Swap_Valuation.xlsm
- Screenshot2023-11-09at4.44.41PM.png
Ch15_Interest_Rate_Swap_Valuation.xlsm
Spot rates
| 3 month Eurodollar futures contract | |||||||
| 15-Mar-12 | Futures | Spot | Discount factors using | Discount factors using | |||
| Quarters | Futures quotes | Annuliazed rate | Annualized rates | spot rates | futures rates | ||
| 1 | June expiry | Mar-Jun-2012 | 99.5250 | 0.47% | 0.47% | 0.99881 | 0.99881 |
| 2 | Sept expiry | Jun-Sep-2012 | 99.4800 | 0.52% | 0.50% | 0.99752 | 0.99752 |
| 3 | Sep-Dec-2012 | 99.4250 | 0.58% | 0.52% | 0.99609 | 0.99609 | |
| 4 | Dec-Mar-2013 | 99.3750 | 0.63% | 0.55% | 0.99453 | 0.99453 | |
| 5 | Mar-Jun-2013 | 99.3050 | 0.69% | 0.58% | 0.99281 | 0.99281 | |
| 6 | Jun-Sep-2013 | 99.2200 | 0.78% | 0.61% | 0.99087 | 0.99087 | |
| 7 | Sep-Dec-2013 | 99.1250 | 0.88% | 0.65% | 0.98871 | 0.98871 | |
| 8 | Dec-Mar-2014 | 99.0250 | 0.97% | 0.69% | 0.98631 | 0.98631 | |
| 9 | Mar-Jun-2014 | 98.9050 | 1.10% | 0.73% | 0.98361 | 0.98361 | |
| 10 | Jun-Sep-2014 | 98.7650 | 1.24% | 0.78% | 0.98059 | 0.98059 | |
| 11 | Sep-Dec-2014 | 98.5950 | 1.41% | 0.84% | 0.97715 | 0.97715 | |
| 12 | Dec-Mar-2015 | 98.4200 | 1.58% | 0.90% | 0.97331 | 0.97331 | |
| <-- =(100-D15)/100 | |||||||
| <-- =((((1+F14/4)^$A14)*(1+E15/4))^(1/$A15)-1)*4 | |||||||
| <-- =1/(1+F15/4)^A15 | |||||||
| <-- =1/((1+E4/4)*(1+E5/4)*(1+E6/4)*(1+E7/4)*(1+E8/4)*(1+E9/4)*(1+E10/4)*(1+E11/4)*(1+E12/4)*(1+E13/4)*(1+E14/4)*(1+E15/4)) | |||||||
Valuation
| 3 month Eurodollar futures contract | ||||||||||||
| 15-Mar-12 | Futures | Spot | fc | 0.90% | Discount factors using | Discount factors using | ||||||
| Quarters | Futures quotes | Annuliazed rate | Annualized rates | Notional ($m) | Interest payment | fixed | pv float | pv fixed | spot rates | futures rates | ||
| 1 | June expiry | Mar-Jun-2012 | 99.5250 | 0.475% | 0.475% | 50,000,000 | $ 59,375.00 | $ 112,517.54 | $ 59,304.58 | $ 112,384.08 | 0.99881 | 0.99881 |
| 2 | Sept expiry | Jun-Sep-2012 | 99.4800 | 0.520% | 0.497% | 50,000,000 | $ 65,000.00 | $ 112,517.54 | $ 64,838.61 | $ 112,238.17 | 0.99752 | 0.99752 |
| 3 | Sep-Dec-2012 | 99.4250 | 0.575% | 0.523% | 50,000,000 | $ 71,875.00 | $ 112,517.54 | $ 71,593.63 | $ 112,077.06 | 0.99609 | 0.99609 | |
| 4 | Dec-Mar-2013 | 99.3750 | 0.625% | 0.549% | 50,000,000 | $ 78,125.00 | $ 112,517.54 | $ 77,697.76 | $ 111,902.22 | 0.99453 | 0.99453 | |
| 5 | Mar-Jun-2013 | 99.3050 | 0.695% | 0.578% | 50,000,000 | $ 86,875.00 | $ 112,517.54 | $ 86,250.05 | $ 111,708.12 | 0.99281 | 0.99281 | |
| 6 | Jun-Sep-2013 | 99.2200 | 0.780% | 0.612% | 50,000,000 | $ 97,500.00 | $ 112,517.54 | $ 96,610.23 | $ 111,490.72 | 0.99087 | 0.99087 | |
| 7 | Sep-Dec-2013 | 99.1250 | 0.875% | 0.649% | 50,000,000 | $ 109,375.00 | $ 112,517.54 | $ 108,140.30 | $ 111,247.36 | 0.98871 | 0.98871 | |
| 8 | Dec-Mar-2014 | 99.0250 | 0.975% | 0.690% | 50,000,000 | $ 121,875.00 | $ 112,517.54 | $ 120,206.19 | $ 110,976.86 | 0.98631 | 0.98631 | |
| 9 | Mar-Jun-2014 | 98.9050 | 1.095% | 0.735% | 50,000,000 | $ 136,875.00 | $ 112,517.54 | $ 134,632.24 | $ 110,673.89 | 0.98361 | 0.98361 | |
| 10 | Jun-Sep-2014 | 98.7650 | 1.235% | 0.785% | 50,000,000 | $ 154,375.00 | $ 112,517.54 | $ 151,378.11 | $ 110,333.23 | 0.98059 | 0.98059 | |
| 11 | Sep-Dec-2014 | 98.5950 | 1.405% | 0.841% | 50,000,000 | $ 175,625.00 | $ 112,517.54 | $ 171,612.80 | $ 109,947.04 | 0.97715 | 0.97715 | |
| 12 | Dec-Mar-2015 | 98.4200 | 1.580% | 0.903% | 50,000,000 | $ 197,500.00 | $ 112,517.54 | $ 192,228.75 | $ 109,514.46 | 0.97331 | 0.97331 | |
| $ 1,334,493.23 | $ 1,334,493.23 | |||||||||||
| Quote data (given) | ||||||||||||
| Notional amount (given) | ||||||||||||
| Estimated from quote data | ||||||||||||
| Estimated from Futures annualized rate | ||||||||||||
| PV of floating should equal PV of fixed (solver) | ||||||||||||
| PV of floating interest payments using spot annualized rates | ||||||||||||
| Estimated using solver | ||||||||||||
| Verifying that PV factors using futures rates and annualized spot rates are same | ||||||||||||
Sheet3
image1.png
Screenshot2023-11-09at4.44.41PM.png
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