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Disadvantages
Long term FX forward risk
Long term view on the FX rate impossible
Euro -
Bid
Ask
2.99
3.02
3.08
3.12
3.24
3.28
3.44
3.48
3.63
3.67
3.83
3.87
4.01
4.05
4.18
4.22
4.32
4.36
4.42
4.46
4.58
4.62
4.75
4.82
5.00
5.04
5.13
5.17
5.19
5.23
3.0313
3.0938
1.4375
US Dollar $
Bid
Ask
5.24
5.27
5.43
5.46
5.56
5.59
5.65
5.68
5.73
5.76
5.80
5.83
5.86
5.89
5.92
5.95
5.96
5.99
6.01
6.04
6.10
6.13
6.20
6.23
6.29
6.32
6.29
6.32
6.28
6.31
4.9373
5.0625
Japanese
Bid
0.23
0.36
0.56
0.82
1.09
1.33
1.55
1.75
1.90
2.04
2.28
2.51
2.71
2.77
2.82
Yen -
Ask
0.26
0.39
0.59
0.85
1.12
1.36
1.58
1.78
1.93
2.07
2.32
2.56
2.76
2.82
2.88
0.1250
0.2188
Example
Receive 4.5% on 10MM USD and pay floating
Euribor 3M
Notional
Effective Date
Maturity
User receives
Pay frequency
Day Count
Business days adj.
User pays Euribor
Pay frequency
Day Count
10MM USD
6/29/2010
6/29/2015
4.50% p.a
SemiAnnual
30/360
unadjusted
3M flat
Quaterly
act/360
To have a quick price of a new Interest Rate Swap transaction user has to
- open SWPM;
- enter the IRS details in the Main Screen relevant input fields;
- select Calculate Premium from Calculate menu field;
- refresh for price
Use the Cashflow Screen to visualize and export to an Excel spreadsheet deal cash
flows, with the ability to choose between Net, Pay, Receive and Historical cash flows.
The Risk Screen shows for each leg some key risk measures :
- DV01: the dollar value of a 1-basis-point negative shift in the curve.
- Risk: the risk for each leg and the deal is calculated according to the following
equations:
Risk = [DV01 / Notional] x 10,000