An FI has entered a $100 million swap agreement with a counterparty. The fixed-payment portion of the swap is similar to a government bond with maturity of 6 years and duration of 4.5 years. The swap payment interval is 1 year. If the relative shock to interest rates [ΔR/(1 + R)] is an increase of 40 basis points.

What will be the change in market value of the swap contract?

Answer rating: 100% (QA)

To calculate the change in market value of the swap contract we need to consider the impact of the i... View the full answer