Date: Monday, March 26, 2007
Read: Valuation of "Plain Vanilla" Interest Rate Swaps (UVA-F-1121)
Network File: FuturesPrices.xls
Class Objective:
Understanding interest rate swaps and how they are priced
Assignment:
Estimate a swap rate for a 3-year (last payment June 2009) interest rate swap (expressed as a fixed annual interest rate that could be swapped for 3-month LIBOR). Estimate a 5-year swap rate (last payment June 2011). Base the pricing using the file of Eurodollar Futures contract prices (from June 2006) and assume that it is exactly 3 months to the first payment on September 12, 2006. Assume the current (as of June 12, 2006) 3-month LIBOR rate is 3.21%.
If you are particularly interested in these markets, try out the Bloomberg System in the library to look at current swap quotes and information on Eurodollar Futures. You can print these out using the instructions listed below.
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.