# Asset swap trading strategies

On a technical note, asset swap trading strategies the asset swap is initiated between coupon dates, the asset swap buyer does not pay the accrued interest explicitly. It has a similar structure to a plain vanilla swap, but the underlying of the swap contract is different. This transaction is shown in Figure 1.

Each type can be in units of either pay leg currency or receive leg currency. A six-entry table maturity date, effective date, first coupon date of fixed leg after effective asset swap trading strategies, next to last coupon date of fixed leg, first coupon date of the floating leg after effective date, next to last coupon date. See note in the Function References for details.

Asset swaps are used to fulfill a variety of goals but are generally undertaken to asset swap trading strategies the character of an investor's asset. The accrual methods table. Users may also be interested in the Asset Swap Cross-Currency workbook. From the perspective of the asset swap seller the present value is:. An asset swap enables an investor to buy a fixed rate bond and then hedge out the interest rate risk by swapping the fixed payments to floating.

See the Description of Outputs in this document for details. Retrieved from asset swap trading strategies https: We solve for the asset swap spread A. This feature prevents the calculated asset swap spread from jumping as we move forward in time through coupon dates.

We cancel asset swap trading strategies the principal payments of par at maturity. FINCAD offers the most transparent solutions in the industry, providing extensive documentation with every product. Archived from the original on 12 April Therefore, if we are exactly halfway between floating side coupons, the floating payment received is half of the Libor plus asset swap spread.

Your use of the information in this article is at your own risk. Retrieved from " https: Both parties to the swap are assumed to be AA bank credit quality and so these cash flows are priced off the Libor curve. The user may asset swap trading strategies select the function on the right hand side of the function finder. What is the asset swap spread?

The break-even asset swap spread A is computed by setting the present value of all cash flows equal to zero. In financial accounting, an asset swap is an exchange of tangible assets for asset swap trading strategies assets or vice versa. It is asset swap trading strategies switch: Other types include the market asset swap and the cross-currency asset swap. For the first part, one needs to calculate the total present value of the cash flows that results from the difference of the bond coupon and the par swap rate, paid at the fixed leg frequency.

Archived from the original on 12 April One of the most important statistics in an asset swap is the par gross spread, also called the asset asset swap trading strategies spread. The net up-front payment has a value P where P is the full price of the bond in the market.

What is the asset swap spread? As an example, a company may sell equity and receive the value in cash, thus increasing liquidity. October Learn how and when to remove this template message. Archived from the original PDF on Archived from the original on 12 Asset swap trading strategies

The effective date is the date asset swap trading strategies the coupons of the fixed and floating legs start to accrue. See note in the Function References for details. As an example, a company may sell equity and receive the value in cash, thus increasing liquidity. The fixed spread to Libor paid by the asset swap seller is known as the asset swap spread and asset swap trading strategies set at a break-even value so the net value of the sale of the bond plus the swap transaction is zero at inception. Instead the notional on the Libor side equals the price of the bond and there is an exchange of notionals at maturity.