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3 years ago

Interest Rate Fluctuations Could Impact Millions in Plain Vanilla Swap Deals

SSRN Electronic Journal
Calculating and Valuing the Payments of Interest Rate Fluctuations of a Plain Vanilla Swap With a Principal Amount of 500,000,000 Pounds
Michel Guirguis

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This article calculates and values the payments of interest rate fluctuations for a plain vanilla swap with a principal amount of 500,000,000 Pounds. The swap involves one party paying a fixed interest rate of 5.5% while the other pays a floating rate based on LIBOR at 7.2%. Payments are made every 6 months for 2 years. Interest rate swaps are commonly used in the financial industry to manage risk and cash flows.