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#asset-swap #finance #gale-using-and-tradning-asset-swaps
In case of par/par asset swap, the investor (asset- swap buyer) buys a bond from an asset swap seller for par rather than the full price. The investor then pays fixed on a swap to the maturity of the bond at a rate equal to the coupon of the bond, and receives the Libor rate less (in the case of most governments) a spread. All fixed cash flows are timed to coincide and net off.
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p5

floating rate. Any technical or fundamenta l factors causing the bond to richen compar ed to Libor will cause this spread to become more negative (‘ widen’ for most governments), and vice versa. The transaction consists of two legs. <span>The investor (asset- swap buyer) buys a bond from an asset s wap seller for par rather than the full price. T he investor then pa ys fixed on a swap to the maturity of the bond at a rate equal to the coupon of the bond, and receives the Li bor rate less (in the case of most governments) a spread. All fixed cash flows are timed to coincide and net off. The spread is calculated such t hat the pres ent value of the swap equals the difference bet ween par and the price of the bond in the market. The dealer is thus compensate d for sel



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