swaps - approach

CFA Level II Derivatives
#1

can someone give me a logical approach which works for most of the questions involving swaps, I’m finding it difficult. Really appreciate if you could give an example. Also do I need to follow another approach for currency swaps?

#2

I rarely get swaps wrong… You have to treat them as cash flow. Cash flow out vs cash flow in… then you never get it wrong by mixing up those cumbersome formulas.

I don’t think you read my post responding to you: https://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91363450

#3

Thank you :+1:

#4

Swaps are (or, at least, should be) easy:

  • You use the same formula for pricing every type of swap:

Swap Fixed Rate = (1 – Z_n) / Σ(Zi_)

  • You use the same formula for valuing every type of swap:

Value = PV(what you will receive) – PV(what you will pay)