What is the value of the swap if either side can cancel

Assignment Help Financial Econometrics

Reference no: EM131241280

Suppose that the LIBOR zero rate is flat at 5% with annual compounding. In a 5-year swap, company X pays a fixed rate of 6% and receives LIBOR. The volatility of the 2-year swap rate in 3 years is 20%.

(a) What is the value of the swap?

(b) Use DerivaGem to calculate the value of the swap if company X has the option to cancel after 3 years.

(d) What is the value of the swap if either side can cancel at the end of 3 years?

Reference no: EM131241280

Questions Cloud

Explain operation of membership service of ttp/c protocol : How is the situation that a node does not receive a message from its immediate predecessor resolved? (In this scenario the node does not know if its incoming link is faulty or the predecessor has not sent a correct message).

Should you be paying fixed or receiving fixed : Estimate the difference between the way a sophisticated trader and an unsophisticated trader would value a LIBOR-in-arrears swap where payments are made annually.

Determine the graphical display tool : Determine the graphical display tool (e.g., Interaction Effects Chart, Scatter Chart, etc.) that you would use to present the results of the DOE that you conducted in Question 1. Provide a rationale for your response.

What system must implement the fail-silence in value domain : What system must implement the fail-silence in the value domain? What are the differences between the TTP/C protocol and the TTP/A protocol? What is the controller state (C-state) of a TTP/C controller? How is the agreement of the C-state enforced..

What is the value of the swap if either side can cancel : What is the value of the swap? - Use DerivaGem to calculate the value of the swap if company X has the option to cancel after 3 years.

Length of the athlete jump : An athlete competing in the long jump leaves the ground with a speed of 9.14 m/s at an angle of 55° with the vertical. What is the length of the athlete's jump if air resistance is of no significance?

What is meant by hdd and cdd : What is meant by HDD and CDD? - How is a typical natural gas forward contract structured? - Distinguish between the historical data and the risk-neutral approach to valuing a derivative.

What is the net force on the 105-kg block : The frictional force exerted by the floor on the 105-kg box is 35 N and the frictional force exerted by the floor on the 40-kg box is 20 N. In this problem, orient your axes such that the right direction is positive and the left direction is negat..

Conduct the same amount of heat : It takest1= 11.8-s to conductQ= 32.8-J of heat across the rod. How much time would it take to conduct the same amount of heat if half the length of the rod were replaced with a material with conductivity κ2=n·κ1, wheren= 4.2?

User Account

All Pages