Swap Pricing vs. Swap Valuing
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Pricing: The determination of initial swap terms at the start of the swap's life
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Interest Rate Swap Price = interest rate paid by fixed rate payer
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Valuing: Calculating the market value of a swap at any point in its life.
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A swap's value at initiation is set to zero.
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Key Swap Valuation Concepts
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Analysts must recognize that a swap's cash flows can be replicated by the cash flows from a portfolio of other financial instruments.
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The value of a floating rate instrument is par (1.0) at its start and on all coupon days.
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