You are asked to mark-to-market the following swap contract. All quoted rates below are APRs, except...

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You are asked to mark-to-market the following swap contract. All quoted rates below are APRs, except OIS rates which are continuously compounded. ● Swap has 16 months remaining, next exchanges are in 4, 10, and 16 months. The LIBOR rate applicable to exchange in 4 months was determined 2 months ago and is 4% per annum. Forward LIBOR rates observed today for 4-10-month period and 10-16-month periods are 5% and 6%, respectively. OIS zero rates for maturities of 4, 10, and 16 months are 2%, 3%, and 4%, continuously compounded, respectively. Fill up the Table below. ● Swap involves paying 5% per annum and receiving LIBOR every six months on notional principal of $100 million. ● Time Fixed cash (yrs) flow $M Floating cash flow $M Net cash flow $M Discount factor Market Value PV of net cash flow $M $M You are asked to mark-to-market the following swap contract. All quoted rates below are APRs, except OIS rates which are continuously compounded. ● Swap has 16 months remaining, next exchanges are in 4, 10, and 16 months. The LIBOR rate applicable to exchange in 4 months was determined 2 months ago and is 4% per annum. Forward LIBOR rates observed today for 4-10-month period and 10-16-month periods are 5% and 6%, respectively. OIS zero rates for maturities of 4, 10, and 16 months are 2%, 3%, and 4%, continuously compounded, respectively. Fill up the Table below. ● Swap involves paying 5% per annum and receiving LIBOR every six months on notional principal of $100 million. ● Time Fixed cash (yrs) flow $M Floating cash flow $M Net cash flow $M Discount factor Market Value PV of net cash flow $M $M

Answer rating: 100% (QA)

SOLUTION To marktomarket the swap contract we need to calculate the present value of the fixed and f... View the full answer