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#asset-swap #finance #gale-using-and-tradning-asset-swaps
In par/par asset swap, the buyer’s receipts on the floating leg of the swap are adjusted by a fixed spread such that the present value of the swap equals the upfront implicit loan of P-100
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p6

r (often the seller) ‘lends’ the buyer by P-100, where P is the full market price of the bond. • The coupons r eceived by the buyer are nette d off against matching fixed payments to the seller on a s wap for the life of the bond. • <span>The bu yer’s receipts on the floating leg of the swap are adjusted by a fixed spread suc h that the present value of the swap equals the upfront implicit loan of P-100. The formula, then, that must be solved for the par/par asset swap spread is: ∑ ∑ = = ⋅ + − ⋅ = − float fix n i i i i n i i t df S L a t df C P 1 1 ) ( ) ( ) ( 100 The formula si



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