Section 2.1
A pay-fixed (receive-floating) position in an interest rate swap is similar to issuing a
fixed-rate bond and buying a floating-rate bond with the proceeds. The duration of the
fixed-rate bond is approximately 75% of the maturity, and the swap is short this
duration. The duration of the floating-rate bond is approximately half its repricing
frequency, and the swap is long this duration. Therefore, the duration of the three-year
swap with semi-annual payments is (0.5 × 0.5) – (0.75 × 3) = –2.00.
5.) Is the notional principal of the swap Watanabe recommends to Kondo most likely
correct?
A. No, it is too high
B. Yes
C. No, it is too low
Answer = A
“Risk Management Applications of Swap Strategies,” Don M. Chance
Bạn đang xem section 2. - CFA MOCK EXAM LEVEL III MOCK EXAM VERSIONB ANSWERS 2014