文档介绍：Ch05_Swaps(互换)(金融工程-华东师范大学汤银才)
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Transforming a Floating-rate Loan to a Fixed-rate
Consider a 3-year swap iniBOR
%
%
%
LIBOR-%
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Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull, 4th edition © 2000 by John C. Hull
The Comparative Advantage Argument (Table , page 129)
Company A wants to borrow floating
Company B wants to borrow fixed
Fixed
Floating
Company A
%
6-month LIBOR + %
Company B
%
6-month LIBOR + %
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Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull, 4th edition © 2000 by John C. Hull
The Comparative Advantage (continued)
One possible swap is
Company A has 3 sets of cash flows 1. Pays 10%pa to outside lenders 2. Receives %pa from B Pays LIBOR + % 3. Pays LIBOR to B a 25bp gain
Company B has 3 sets of cash flows 1. Pays LIBOR + %pa to outside lenders 2. Receives LIBOR from A Pays %pa 3. Pays % to A a 25bp gain
Company B
Company A
%
LIBOR
10%
LIBOR + 1%
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Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull, 4th edition © 2000 by John C. Hull
The Swap (Figure , page 130)
A
B
LIBOR
LIBOR+1%
%
10%
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Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull, 4th edition © 2000 by John C. Hull
The Swap when a Financial Institution is Involved (Figure , page 130)
A
.
B
10%
LIBOR
LIBOR
LIBOR+1%
%
%
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Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull, 4th edition © 2000 by John C. Hull
Total Gain from an Interest Rate Swap
The total gain from an interest rate swap is always |a-b| where
a is the difference between the interest rates in the fixed-rate market for the two parties, and
b is the difference between the interest rates in the floating-rate market for the two parties
In this example a=% and b=0.