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UNWINDING SWAPS
Original Swap: TERMS: (I) Party receives 8% DOL, and pays 10% in French Franc.
Duration of Swap is 5 years
FF|$ rate is 5FF=1$, Notional in Dollars is 100m and hence in FF is 500
0
1
2
3
4
5
Receive
Pay
Dollars
FF
-$100.00
500.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$108.00
-550.00 F
($106.93)
PV of F 553.1035129
Dollars
at 9%
FF equivale 1069.30211
(i) Compute the number in cell F37 as npv @6%
(ii) compute the notional for FF swap as cell c37 multiplied by 10 (new fx rate)=1069.3
(iii) compute the net in cells i32 through i35 as PV @9%
(iv) Thus the party would require 553.10 m FF to take it out of the original swap and take the new swap
UNWINDING SWAP:
0
1
2
3
4
5
Receive
Pay
Dollars
FF
-$100.00
500.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$8.00
-50.00 F
$108.00
-550.00 F
-$8.00
-$8.00
-$8.00
-$108.00
PV of
Dollars
($106.93)
24.059 F
24.059 F
24.059 F
291.385 F
Net FF
from Swap
-25.941 F
-25.941 F
-25.941 F
-258.615 F
-248.873 F
FF equivale 267.325528
(Thus the party would pay 248mFF to take it out of the original swap and take the new swap