Valuing Interest Rate Swaps: Offsetting Swap Method
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1. Context
In this video from FRM Part 1, we explore an alternative approach for valuing interest rate swaps – the offsetting swap method. We make ourselves familiar with the steps in this approach and then apply it to a simple solved example. We already know how to value swaps using the FRA method and the Bond method, the equivalence of which we explored in this post here on Valuing Interest Rate Swaps: Equivalence of Bond & FRA Methods. The details of the reading in which this topic appears are given below:
| Area | Financial Markets and Products |
| Reading | Swaps |
| Reference | John C. Hull, Chapter 7. Swaps In Options, Futures, and Other Derivatives, 10th Edition, (New York: Pearson, 2017). |