Define and explain a constant maturity swap

Reference no: EM13925923

1. An interest rate swap has two primary risks associated with it. Identify and explain each risk.

2. Define and explain a constant maturity swap.

3. Consider a $30 million notional principal interest rate swap with a fixed rate of 7 percent, paid quarterly on the basis of 90 days in the quarter and 360 days in the year. The first floating payment is set at 7.2 percent. Calculate the first net payment and identify which party, the party paying fixed or the party paying floating, pays.

Reference no: EM13925923

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