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


red


Embedded Image

Syntax for embedding an image:

[[Image:{name}|{type}|{location}|{size}|{upright}|{border}|{caption}]]
Error creating thumbnail: Unable to save thumbnail to destination

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:
Failed to parse (Missing <code>texvc</code> executable. Please see math/README to configure.): 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


  • P0 is the present value factor based on the interest rate applicable to that period (0 to tn) which can be:
  • a single rate
  • a series of chain-linked periodic rates)

Valuing

Value Failed to parse (Missing <code>texvc</code> executable. Please see math/README to configure.): V_{t}={\frac {S_{t}}{S_{0}}}-P_{0}(0,t_{n})-r_{{FS}}(\sum _{{i=1}}^{n}P_{0}(0,t_{i}))

where
PV factors are as for valuing interest rate swaps
New term structure for time t is used to calculate PV factors


Failed to parse (Missing <code>texvc</code> executable. Please see math/README to configure.): {\frac {1+x^{2}}{y-4}}


Failed to parse (Missing <code>texvc</code> executable. Please see math/README to configure.): {\frac {1+c^{{e-y}}}{(1+t)^{n}}}


Testing upload in new version


Testing team pages