LIBOR zero rates are flat at 5% in the U.S and flat at 10% in Australia (both
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LIBOR zero rates are flat at 5% in the U.S and flat at 10% in Australia (both annually compounded). In a four-year diff swap Australian LIBOR is received and 9% is paid with both being applied to a USD principal of $10 million. Payments are exchanged annually. The volatility of all one-year forward rates in Australia is estimated to be 25%, the volatility of the forward USD-AUD exchange rate (AUD per USD) is 15% for all maturities, and the correlation between the two is 0.3. Assume a USD risk-free discount rate of 4.7%. What is the value of the swap?
Discount RateDepending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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The fixed side consists of four payments of USD 09 million The present value in millions of dol...View the full answer
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