If "John is long a interest rate swap", what does that mean? Which position is he taking? Also, is there a long-short position for FX swaps? Intuitively for me there shouldn't be, but I'm just paranoid I'm going to see a question like "John is long a USD:EUR swap" and not know what the positioning is.

Hi @artyeasel, in a plain vanilla or generic interest rate swap, an exchange of fixed and floating payments occur between 2 parties. So there is a long-short position for interest rate swaps: Fixed-rate payer (or floating-rate receiver) is often referred to as having bought the swap or having a long position. Floating-rate payer (or fixed-rate receiver) is referred to as having sold the swap and being short. An FX (currency) swap, unlike interest rate swaps, usually involves the exchange of principal and interest in one currency for the same in another currency. There is a long and short position in FX swaps too. So if for example John was receiving USD and paying out EUR cashflows, John is long USD and short EUR.

Brilliant - thanks @sophie! Let me see if I got it right: For interest rate: Paying Fixed = Long Paying Float = Short For FX: Long = receive Short = pay Correct?

Add A Reply Login Sign Up Topic Resolution: Resolved This topic has 3 replies, 2 voices, and was last updated Apr-176:19 am by Sophie Macon. Author Posts artyeaselParticipant 01 Apr 2017 at 5:21 am Up306:: If “John is long a interest rate swap”, what does that mean? Which position is he taking? Also, is there ... Read more

Hi @artyeasel, in a plain vanilla or generic interest rate swap, an exchange of fixed and floating payments occur between 2 parties. So there is a long-short position for interest rate swaps: Fixed-rate payer (or floating-rate receiver) is often referred to as having bought the swap or having a long position. Floating-rate payer (or fixed-rate receiver) is referred to as having sold the swap and being short. An FX (currency) swap, unlike interest rate swaps, usually involves the exchange of principal and interest in one currency for the same in another currency. There is a long and short position in FX swaps too. So if for example John was receiving USD and paying out EUR cashflows, John is long USD and short EUR.

A CFA Level 3 Discussion About Long And Short Interest Rate Swap Explained

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Topic Resolution: Resolved

This topic has 3 replies, 2 voices, and was last updated Apr-176:19 am by Sophie Macon.

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- artyeasel
  Participant
  01 Apr 2017 at 5:21 am
  Up
  306
  ::
  If “John is long a interest rate swap”, what does that mean? Which position is he taking?
  
  Also, is there a long-short position for FX swaps? Intuitively for me there shouldn’t be, but I’m just paranoid I’m going to see a question like “John is long a USD:EUR swap” and not know what the positioning is.
- Sophie Macon
  Keymaster
  01 Apr 2017 at 5:57 am
  Up
  6
  ::
  Hi @artyeasel, in a plain vanilla or generic interest rate swap, an exchange of fixed and floating payments occur between 2 parties.
  
  So there is a long-short position for interest rate swaps:
  - Fixed-rate payer (or floating-rate receiver) is often referred to as having bought the swap or having a long position.
  - Floating-rate payer (or fixed-rate receiver) is referred to as having sold the swap and being short.
  An FX (currency) swap, unlike interest rate swaps, usually involves the exchange of principal and interest in one currency for the same in another currency. There is a long and short position in FX swaps too.
  
  So if for example John was receiving USD and paying out EUR cashflows, John is long USD and short EUR.
- artyeasel
  Participant
  01 Apr 2017 at 6:17 am
  Up
  8
  ::
  Brilliant – thanks @sophie! Let me see if I got it right:
  
  For interest rate:
  Paying Fixed = Long
  Paying Float = Short
  
  For FX:
  Long = receive
  Short = pay
  
  Correct?
- Sophie Macon
  Keymaster
  01 Apr 2017 at 6:19 am
  Up
  5
  ::
  Yup @artyeasel! Spot on.
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