A financial institution has entered into a swap where it agreed to make quarterly payments at a

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A financial institution has entered into a swap where it agreed to make quarterly payments at a rate of 3% per annum and receive the SOFR three-month reference rate on a notional principal of $100 million. The swap now has a remaining life of 7.5 months. Assume the risk-free rates with continuous compounding for 1.5, 4.5, and 7.5 months are 2.8%, 3%, and 3.1%, respectively. Assume also that the continuously compounded risk-free rate observed for the last 1.5 months is 2.7%. Estimate the value of the swap.

Posted Date: Oct 20, 2021 01:28 AM

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A financial institution has entered into a swap where it agreed to make quarterly payments at a

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