Bilaterally cleared and centrally cleared swap

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What is the fair value of a centrally cleared $500 million, 1.75%, three years remaining, annual pay swap given the Libor rates as shown below? Assume the Libor- OIS spread is constant at 18.125 basis. Answer the question from the perspective of the fixed rate receiver.

Tenor

Libor

1y

2.750

2y

2.625

3y

2.125

Briefly describe the functional differences between a bilaterally cleared and a centrally cleared swap.

Many straightforward or so called plain-vanilla swaps are now centrally cleared. Why may it be difficult to centrally clear swaps with overly complex or unusual payoff terms?

Reference no: EM133076041

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