Equity swap valuation, suppose six months ago we entered a receive-fixed, pay -equity five-year annual reset swap in which the fixed leg is based on a 30/360-day count. The swap was entered at a fixed rate of 2.0%, the notional was 5,000,000 and the equity was trading at 100. The current spot rates have fallen to 1.5% across maturities and the equity is trading at 108. What is the fair value of the equity swap?

Answer rating: 100% (QA)

Firstly we will calculate the value of the amount that we need to receive N Discounting perio... View the full answer