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Swap duration – Schweser 1PM – Q44

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    • Avatar of Alta12Alta12
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        18 Oct 2017 at 2:27 pm
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        @vincentt @ravivooda @Sophie‌

        Given: The company enters into a 2 year swap with semi coupon payments to pay floating and receive fix. Question states duration of the fixed side of the swap is 1.2.

        I calculated:

        pay floating = -1/ 2 x 2 = – 0.25
        receive fixed = 1.2 x 2 = 2.4 (this is where I’ve gone wrong…should not have times it by 2. The duration of the fixed side is simply 1.2). I’m not getting this because in the CFAI text examples, the fixed duration is always x by the number of years in the swap. Am I missing something?

        Thanks!

      • Avatar of vincenttvincentt
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          • CFA Level 3
          18 Oct 2017 at 4:14 pm
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          As far as i’m aware the duration for a given bond is the duration of the enter period, i don’t think you have to multiply by the years.

        • Avatar of Alta12Alta12
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            18 Oct 2017 at 4:45 pm
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            @vincentt I think I get it now. Fixed swap duration was given to be 1.2 yrs. It could not have been for one year. OMG! Confusion. Thanks for clearing it up for me.

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