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Tags

#asset-swap #finance #gale-using-and-tradning-asset-swaps

Question

What's the relation between par-par asset swap spread and MVA asset swap spread? Which is smaller (if the bond is at premium) and why? Give the formula.

Answer

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Tags

#asset-swap #finance #gale-using-and-tradning-asset-swaps

Question

What's the relation between par-par asset swap spread and MVA asset swap spread? Which is smaller (if the bond is at premium) and why? Give the formula.

Answer

\(S_{MVA}=S_{par/par}\frac{100}{P}\)

MVA is smaller because it has smaller collateral requirements (smaller present value of the "loan").

MVA is smaller because it has smaller collateral requirements (smaller present value of the "loan").

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#### pdf

owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p8

e final payment. The right hand side contai ns the present value of the fixed payments received (equal to t he coupon rate) and the present value of the floating payments of Libor less the spread bas ed on a notional of P. Notice the <span>similarity with the equation for the par asset swap. It can be shown that: P S S par par MVA 100 / ⋅ = Where S MVA is the MVA swap spread, S par/par is the par/par swap spread and P is the dirt y price of the bond. A simple de

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