Interest rate swaps valuation

CFA Level II Derivatives
#1

Hi,

I wanted to get some clarification on interest rate swaps valuation.

My understanding is the following:

  1. If valuing on a reset date, then we can simply apply the formula:
    (Current fixed periodical rate - Inception fixed periodical rate) * Notional * Sum of PV factors

  2. However, if valuation point is NOT reset date, then the preceding formula doesn’t seem to work. What is the underlying logic of why it doesn’t work in non-reset dates?

For non-reset date, I apply = coupon * (sum of PV factors) + notional * last PV factor