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#asset-swap #finance #gale-using-and-tradning-asset-swaps
In par/par asset swap, the interest rate implicit on the loan of P-100 is Libor since it is repaid via a swap (for which the discount curve is Libor) which is not always an appropriate rate.
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p7

of the upfront payment. This will depend on the coll ateral agreements in place with each counterparty. The distortion due to a n inappropriate assumption on the funding can be ver y substantial where a bond trades far from par . <span>The interest rate implicit on the loan of P-100 is Libor since it is repaid via a swap (for which the discount curve is Libor). But this is only appropriate if L ibor is the right rate to apply given the collateral pr ovided. In some cases, the correct rate for the loan will be general collateral re po on the



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