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#asset-swap #finance #gale-using-and-tradning-asset-swaps
In MVA asset swap, the buyer’s receipts on the floating leg of the swap, which is based on a notional amount equal to the dirty price of the bond, are adjusted by a fixed spread such th at the future value of the swap equals the excess paid over par, P-100
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p8

asset swap as constructed in the fo llo wi ng way: • The bond is sold at the market value, P. • The coupons receiv ed by the buyer are cancelle d by matching fixed payments to the seller on a s wap for the life of the bond . • <span>The buyer’s receipts on the floating le g of the swap, which is based on a notional amount equal to the dirty price of the bond, are adjusted by a fixed spread such th at the future value of the swap equals the excess paid ov er par, P-100. • The investor receives P-100 from the dealer at the maturit y of the swap. The formula which must be solved for the MVA asset swap spread is: ∑ ∑ = = ⋅ + ⋅ ⋅ − ⋅ = ⋅ − float



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