Pricing an interest-only single currency swap after inception involves
A)sending a market order to a swap dealer.
B)finding the difference between the present values of the payments streams the party will receive and pay.
C)finding the sum of the present values of the payments streams that each party will receive in one currency and pay in the other currency,converted to a common currency.
D)none of the options

Question

Quizplus · Accepted Answer

In order to price an interest-only single currency swap after inception, one needs to calculate the present value of the remaining payment streams for both parties and find the difference between them. This involves discounting future cash flows based on the prevailing interest rates and market conditions to determine their present value. Option A is not appropriate as it suggests executing a market order, which is not relevant to pricing a swap. Option C is referring to a cross-currency swap, which involves payments in two different currencies and is not relevant to the given question. Option D is incorrect as there is a specific process involved in pricing a swap after inception.

Pricing an Interest-Only Single Currency Swap After Inception Involves