As examples we consider two receiver swaps, EUR1 5Y spot

and 6M5Y, i.e. a 5Y EUR swap, 6 month forward. We

consider 6M roll and carry2.

Forward Swap Rate at time t

SR(Ta-t, Tb-Ta) Ta Starting Time
SR(0,5Y) Tb Ending Time

Fixing
F(Ta-t, Tb-Ta)
F(0,6M)

Swap With Fixed Rate

Swp(Ta-t, Tb-Ta,k)
 Spot Rate 1$ 60
3Month Forward rate 1$ 65
$ on premium

Forward Permium % for $

F-S/S x 12/N x100 0.016667 0.015385
0.015385
0.001282 0.083333 8.333333

N mean Forward rate period 60 65

Forward Permium % for Rs 65
S-F/F x 100x12/N 5 0.076923
 SWAP RATE

Spot Rate 1 $ 60.20 / 60.70 Swap rate is

1 month 1 $ .30/.40 Ince 60.70 / 61.10
2 month 1 $ .40/.30 Dec 58.80/60.40

7.692308
pre-utilization of contracts
Settlement on Maturity
Pre utilization of Contract (Wondow Froward) $100 M @ 72 or Dec 2040
Cancellation Deal Date
Rollover Maturity
Strick / Forward Rate 72 per $
Note mOre

Settlement on Maturity
Rate 2040
62 +10
75 -3
80 -8
 Cancellation In between & Settlement
Spot Rate +Premium
1-Jan-14 Assume 62 + 3 = 65
31-Dec-14

100M

Rollover Cancellation+ New Contract Spot + in b/w Cancellation

Gain
Loss
Loss
 Step 1
Spote Rate $ 1 = 1.1620 CAD Premium % Borrow USD 1M
3month $ 1 = 1.1640 CAD 1.1640-1.1620/1.1620 4% PA
0.1721% To repay at the end of 3 month
Interest Rate PA Interest Rate Differ A=P(1+I)n
USA 4% (5%-4%)/12*3 1x(1+4%*3)/12
Cananda 5% 0.25% USD 1.01 M
Interest Rate is higher then Premium Step 2
Cananda paying Higher Interest 1M USD = 1.1620 M CAD
Step 3
1.1620 M CAD @ 5% for 3 month
After 3 Month money Receved
1.1620 x (1+5%3/12)
1.1765M CAD
Step 4
1.1765 / 1.1640
1.0108 M USD

Balance
1.0108-1 M
0.00008 M
 1000000

t the end of 3 month

1010000 $

1.1620 M CAD 1162000 Cand

CAD @ 5% for 3 month

onth money Receved

1176525 1.25

1010760

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