Skip to content

In a swap the floating side duration is:

March 10, 2018

1/2 the length of the payment period.

This is then subtracted from the fixed side to get the net duration of the swap to increase duration of the portfolio and subtracted from the floating side to reduce overall portfolio duration.

Advertisements

From → Asset Valuation

One Comment
  1. This is really tricky and I did not get it the first time I read the text book so of course I re-read then while doing practice problems I Googled. It seems you subtract the floating side duration to calculate the swap duration when you want to increase the overall portfolio duration and then you subtract the fixed side from the floating side duration to calculate the swap duration when you want to reduce overall portfolio duration. But I am not 100% sure and I am not getting why, swaps and swaptions are not my area of expertise obviously.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: