Time Floating Rate Floating CFFixed CF Net CF(%) Principal Actual CF

0 5.50%
6 5.80% -2.75 3 0.25 10 0.025
12 6.20% -2.9 3 0.1 10 0.01
18 6.50% -3.1 3 -0.1 10 -0.01
24 6.60% -3.25 3 -0.25 10 -0.025
30 -3.3 3 -0.3 10 -0.03

Present Value = (.025*e-5.5%*0.5) + (.01*e-5.8%*1) – (.01*e-6.2%*1.5) - (.025*e-6.5%*2) - ( .03*e-6.

PV -0.022743
25*e-6.5%*2) - ( .03*e-6.6%*2.5)
1 5.35% 0.000147 1.000147
2 5.33% 0.000146 1.000293
3 5.34% 0.000146 1.000439
4 5.35% 0.000147 1.000586
5 5.36% 0.000147 1.000732
6 5.36% 0.000147 1.000879

1.002158
 Current Mibor 5.20%
Forward Mibor coupon Bfl Bfx 6.008%
0.5 5.35% 7 37.85845 37.8584 37.85837
1 5.55% 7
1.5 5.95% 7
2 6.25% 7
2.5 6.50% 7
3 6.60% 7
 Fixed Rate Floating Rate
A 4.20% MIBOR+0.1%
B 5.20% MIBOR+0.6%
Difference 1 0.5
Comparative Advantage 0.5
Comparative advantage share 0.25

4.20% A B

Step 1 Initiate a favourable floating rate to A below rate offered to it in the market
MIBOR
4.20% A B

Step 2 Advantage received by A by virtue of better floating rate(MIBOR+0.1- MIBOR) = 0.1

So balance advantage(0.25-0.1) is to be adjusted in fixed interest recived from B
Thus this fixed rate should be more than 4.2%(given by A) by 0.15 ,which is 4.35%
MIBOR
4.20% A B
4.35%

For A Paid -4.2

Received in swap 4.35
Paid in swap MIBOR
Net MIBOR-0.15
Market Rate MIBOR+0.1
Benefit 0.25

For B Paid MIBOR+0.6

Received in swap MIBOR
Paid in swap 4.35
Net 4.95
Market Rate 5.2
Benefit 0.25
 MIBOR+0.6%

MIBOR+0.6%

0.1- MIBOR) = 0.1

recived from B
,which is 4.35%
MIBOR+0.6%
 Spot Premium
RIL
19/7/21 S 2000 20/7/21 2020 44
Strike Price 2000 21/7/21 2040 48
1-month
Premium 40
Going up is beneficial
Breakeven Price 2040

2000 2020

Strike 2000 Settlement 2030

Premium 35
Premium 25

Premium Call Options Strike PriceSpot Price Put Options

More than 100 In-the-money 1900 2000 Out-of-money
At-the-money 2000 At-the-money
Cheapest premi Out-of-money 2100 In-the-money
Exercise Square-off

Call option can be exercised if Strike Price < Settlement Price 44 300 1200
20 48 300 2400
40
-20

1 2
Exercise- Yes,Exercise benefit(2030-2000) -35 =-5 Exercise-Yes,Exercise benefit(2030-2000)-25=5