Session #6:  Pricing Interest Rate Swaps

Date  Thursday, September 8, 2005

Read:  Valuation of "Plain Vanilla"  Interest Rate Swaps, UVA-F-1121

File:  None 

Assignment:

Please come to class with a swap rate for a 3-year (last payment June 2007) and a 5-year (last payment June 2009) interest rate swap. This should be priced off the file of  Eurodollar Futures contract prices.  Do the pricing assuming that it is exactly 3 months from June 12, 2004 to the first payment on September 12.  Assume that the current (as of June 12, 2004) 3-month LIBOR rate is 1.11%.

As part of the assignment for this class please try and use the Bloomberg System in the library to obtain current swap quotes and information on Eurodollar Futures.  Print these out.  Instructions for doing this are listed below.  Note the day and the time of the quotes. Please do this between Friday when the assignment is handed out and when we have class on Thursday.  If everyone tries to do it on Wednesday night it will not work.  There are two Bloomberg machines and about 250 students in Valuation.

Swap Quotes:
hit M-Mkt key, then type IRSB and hit Go
Select 18) United States by entering 18 and hitting Go
This is the swap quote page. To print a copy hit the print key.

Eurodollar Futures Analysis:
hit Cmdty and enter EDS and hit Go
This will get you to the IMM Eurodollar Futures Analysis page.
To print a copy hit the print key.