Swaps Fixed vs. Float Is this thinking correct?

CFA Level III Derivatives
#1

RECEIVER SWAP (Pay float Receive Fixed) - Increases duration of asset (fixed pmt) Decreases duration of liability (float pmt), Increase cash flow risk (pay float) Decreases Market Value risk

PAYER SWAP (Pay fixed receive float) - Decreases duration of assset (float pmt) Increases duration of liability (fixed pmt) Decreases cash flow risk (pay fixed) Increase market value risk

Fixed payments duration > Float payment duration

Is this all correct? Is there anything important I should know or am missing? Thanks!

#2

That is all correct.

#3

Also, maybe just know for the fixed leg of the swap, assume duration = 75% of the maturity of the fixed rate bond (if duration is not given) I saw this in CFA 2016 AM mock I believe.

#4

And if I recall correctly rule of thumb for duration for floating leg is 50% of payment period.

#5

What’s the intuition behind decreased market value risk for receiver swap and increased market value risk for payer swap?

With the receiver swap, your net duration is increasing (asset duration up, liablity duration down). Wouldn’t that increase your market risk to an increase in interest rates?

#6

Receiver swap is increased market value risk.

#7

The opening message on this thread looks correct to me. And it was a nice way to summarize it.