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Determine the initial value and the swap rate today

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Question - A corporation enters into a 1-year interest rate swap with a notional of €100 million in which it agrees to pay a fixed rate and receive a floating rate of Euribor. The payments are made quarterly based on 30/360 basis. When the swap is initiated, the term structure of Euribor is as follows:

Tenor

Day Count

Euribor (%)

3 months

90

3.00

6 months

180

3.20

9 months

270

3.60

12 months

360

4.00

(a) Determine the initial value and the swap rate today.

(b) Calculate the first net payment on the swap.

(c) Assume that it is now 60 days into the life of the swap. Calculate the value of the swap given that the term structure of Euribor is updated as follows.

Tenor

Day Count

Euribor (%)

1 months

30

2.90

4 months

120

3.10

7 months

210

3.40

10 months

300

3.80

Reference no: EM132959498

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