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par/par asset swap
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Trade: Bond bought for par, plus a swap.
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p3

simple ASW transaction Good when the yield curve is flat. Very poor when comparing bonds with very different coupons and the yield curve is steep. Par/Par Spread: Spread applied to floating leg such that Swap PV = 100 – Bond DP <span>Trade: Bond bought for par, plus a swap. Swap fixed schedule matches bond coupons. Floating schedule is [Libor + Spread]. Notional is Par. For given bond price, par/par swap spread falls as the swaps curve steepens.



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