Pricing and Valuation of Interest Rates and Other Swaps (2024 Level I CFA® Exam - Derivatives - M7)

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Topic 7 - Derivatives
Module 7 - Pricing and Valuation of Interest Rates and Other Swaps
LOS : Compare the value and price of forward and futures contracts.
LOS : Explain why forward and futures price differ.

[@luisasolispuello4964]

Amazing video. I am studying a MSc In Finance and Invesment in England, these videos are being live saving for me. The way James explains is very intuitive, helping to grasp the concept and deepen the understanding of complex concepts. Many thanks.

[@wolfmangoland7972]

One of the best videos on this topic. Thank you.

[@Juzyeah]

thank you so much for your video！

[@bhdkid1]

Great

[@perumahandicianjur1247]

Mantap

[@richitbid2134]

at the 25th minute, in the periodic settlement value, the formula and and the value differs. is it the right calculation?

[@ishikaagarwal6945]

Can somebody explain why is the fixed receiver getting a loss when the interest rate expectations are unchanged

[@mooooooooooooove]

Because the 2.5% fixed swap rate is set so that the present value of fixed and floating payments is equal (over the next four years). If interest rates expectations are unchanged, the present value of the payments to be paid goes above the present value of the fixed payments to be received.

[@xj7937]

​@@moooooooooooooveyou didnt explain anything??

[@mehulmodi9397]

Although I am a year late, I will give it a go. The implied rate is the rate that we calculate using spot rates. If the implies rate is equal to the actual forward rate at time 1,2,3,4 etc then it means the fixed payment receiver must receive less than what he pays since he is in a surplus already. We can illustrate using an analogy. Let's say we have 2 buckets both with100 litres of water and I will lend you water from my bucket and vice versa. During my first expedition I took 30 litres from your bucket while you took 10. Now we know that in the next 3 turns you can take 90 from me while I can only 70 from you . Thus in the next 3 turns I am at a loss cumulative of the next 3 turns