Browse By

Online Finance – Pricing Interest Rate Swaps – Pricing Basis Swap

Pricing Basis Swaps or Floating for Floating Swaps

The same methodology will be used to price floating for floating or basis swaps, except that zero curves and forward rates will be derived for both legs of the swap accordingly.

The following basis swap has been priced below:

Term Sheet

BASIS SWAP (FLOATING FOR FLOATING)
Notional100,000
Floating Rate 1 (Paying Leg)Treasury Rate
Floating Rate 2 (Receiving Leg)Interbank Offer Rate + spread
Spread0.50%
PaymentAnnual
Fixed Rate Payment Dates1st Day of the year starting January 2011 and ending on the Maturity Date
Floating Ratesame as Fixed
Valuation Date27/05/2010
Maturity Date01/01/2015
Day count conventionA/360 for Leg 1 & A/365 for leg 2

Pricing

TreasuryInterbankPaying LegReceiving Leg Payment
Period EndZCFCZCFCRateCash flowRateCash flowPV of Paying LegPV of Receiving Leg
01/01/1112.21%12.21%12.15%12.15%12.21%7,32612.65%7,5906,8307,085
01/01/1212.28%12.33%12.23%12.27%12.33%12,32612.77%12,77210,21410,620
01/01/1312.35%12.50%12.35%12.59%12.50%12,50513.09%13,0869,1959,664
01/01/1412.41%12.55%12.42%12.59%12.55%12,54613.09%13,0938,1848,588
Total PV34,42435,958
Price1,533.73

2 thoughts on “Online Finance – Pricing Interest Rate Swaps – Pricing Basis Swap”

  1. Pingback: Options, Forwards, Futures: Pricing Interest Rate Swaps
  2. Trackback: Options, Forwards, Futures: Pricing Interest Rate Swaps
  3. Pingback: Forwards and Swaps Interest Rates Models Bootstrapping the Zero curve and Implied Forward curve | Learning Corporate Finance
  4. Trackback: Forwards and Swaps Interest Rates Models Bootstrapping the Zero curve and Implied Forward curve | Learning Corporate Finance

Comments are closed.