Pricing Interest Rate Swaps

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In todays video we will learn the two methods for pricing interest rate swaps.

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link.
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Interest Rate Swap Valuation

Swaps are typically valued at zero at inception. Afterwards they, may take on a positive or negative valuation. Swaps are a zero-sum game, one counterparty’s gain is equal to the other counterparty’s loss.

A plain vanilla interest rate swap can be priced as either a combination of a long position in one bond and a short position in another bond, or as a portfolio of forward-rate-agreements. In this video we will learn about both the bond valuation approach and the FRA (Forward rate agreement) approach to pricing interest rate swaps.

Trading and Pricing Financial Derivatives