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#asset-swap #finance #gale-using-and-tradning-asset-swaps
Par/par asset swap not being duration-hedged means that the P&L will vary with outright market level, i.e., the par /par spread is directional.
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#### pdf

owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p6

spread moves to -35 bp, we can unwind the pos ition by paying on a swap of the same notio nal and pay floating less 35 bp to lock in a loss of 5 bp running . One problem with the methodolo g y is that the trade is not duration hedged. <span>This means that the P&L will vary with outright market level, i.e., the par /par spread is directional. The exposure is bullis h. Another problem is that the spread UST 11.25% 2/15/15 $158.00 (initial payment)$58.00 (initial payment) 11.25% (S/A Act/Act) (coupon payment s) 11.25

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