Sandbox

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This is the Green Needham wiki sandbox. Go ahead and edit this page to get the hang of using the wiki.

Try creating new pages. If you make the first word of the name "sandbox", you'll be sure not to interfere with any real pages by accident. Here's an example of a new page - My test page.

Other online resources

Wikitext Examples
A Quickie Wiki Guide to Editing Content - A useful reference

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Embedded Image

Syntax for embedding an image:

[[Image:{name}|{type}|{location}|{size}|{upright}|{border}|{caption}]]

Text can continue around the image. It will continue to wrap. There should be enough to go around the entire image. Otherwise, the text may move on to an unrelated part of the wiki.

Tables can used for more precise control of the location of images, but they add complexity.

This is a major section

Here's a link to the EPA's page for kids.

This is a second-level section

Here's a link to another page within the wiki - Green Needham Tips

Pricing

Swap value is zero at initiation, so can calculate price
Replicate swap with underlying assets and price those

Key insights for pricing:

Value of a floating rate security is par value at the start and at all coupon reset dates
To the borrower, an interest rate swap is equivalent to borrowing at a fixed rate.
Therefore, value of fixed payments is equivalent to the price of a coupon bond (see this section of Fixed Income Investments). So the fixed rate is:

$r_{fs} = \frac{1 - P_0(0,t_n)}{\textstyle \sum_{i=1}^n P_0(0,t_i)} \quad \mbox{- or - } \quad r \textstyle \sum_{i=1}^n P_0(0,t_i) + P(0,t_n) = 1$