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Among the major innovations in the financial markets have been interest rate swaps and swapations, instruments which entail having an arrangement to barter differently structured payment flows for a particular period of time. These instruments have furnished portfolio and risk managers and corporate treasurers with a better tool for controlling interest rate risk. "Valuation of Interest Rate Swaps and Swapations" explains how interest rate swaps are valued and the factors that affect their value-an ideal way to manage interest or income payments. Various valuations approaches and models are covered, with special end-of-chapter questions and solutions included.
List of contents
About the Authors.
Introduction.
Calculating Swap Payments.
Computing the Present Value of Swap Payments and Determining theSwap Fixed Rate.
Traditional Approach to the Valuation of a Plain VanillaSwap.
Lattice Approach to Valuation.
Swap Valuation Using the Lattice Approach.
Valuation of Forward Start Swaps.
Valuing a Swaption.
Factos that Affect the Value of a Swaption.
Valuing Non-LIBOR Based Swaps and Basis Swaps.
Controlling Interest Rate Risk with Swaps.
Appendix A: Theoretical Spot and Forward Rates.
Appendix B: Binomial Interest Rate Model.
Appendix C: Valuation of Swaps Using the Trinomial Approach.
Index.
About the author
Frank J. Fabozzi, PhD, is editor of the Journal of Portfolio Management, which is read by thousands of institutional investors. An Adjunct Professor of Finance at Yale University's School of Management, he is a chartered Financial Analyst and a Certified Public Accountant. Editor or author of over 100 books, his world-class finance books are used around the world by professionals, academics, students, strategists, and investors in college courses, executive training programs, company training programs, and prepatory courses for the chartered financial analyst (CFA) exam. He serves on the board of directors of the BlackRock complex of funds and the Guardian Life family of funds and is also a Fellow of the International Center for Finance at Yale University. Dr. Fabozzi earned his doctorate in economics from the City University of New York in 1972 and in 1994 received an honorary doctorate of Humane Letters from Nova Sotheastern University.
