Deck 7 – Swaps

If floating interest rates rise after a swap is initiated, who benefits in a fixed-for-floating swap?

The fixed-rate payer benefits; the swap value becomes positive.

If market interest rates rise after a pay-fixed swap is initiated, who generally benefits?

The fixed-rate payer generally benefits.

How can a plain-vanilla interest rate swap be viewed conceptually as a series of shorter contracts?

As a series of forward rate agreements on successive periods.

If market interest rates rise after initiation, who benefits on an existing pay-fixed, receive-floating swap?

The fixed-rate payer benefits.