Assume you have the long GBP position in a 2-Year at-market fixed-for-fixed USD/GBP currency swap. Payments occur at the end of each year. The notional amount is USD 1,000,000. The interest rates are rUSD = 2% and rGBP = 3% The spot rate when the contract originated was X0USD/GBP = 1.40. At the end of year one.

How much and in what currency do you have to pay the other swap party assuming that you would NOT settle with a difference check (please note that you cannot calculate the difference check yet)?

Answer rating: 100% (QA)

To determine the payment you need to make at the end of ... View the full answer