Chapter 9: Pricing and Valuation of Swaps

In this section

• Swaps as Portfolios of Forward Contracts
  Swaps as Portfolios of Forward Contracts (CFA Level 1): Swap Cash Flows as Forward Commitments, FRA Building Blocks, and Decomposing an Interest Rate Swap Diagrammatically. Key definitions, formulas, and exam tips.
• Valuing Interest Rate Swaps and Swap Rates
  Valuing Interest Rate Swaps and Swap Rates (CFA Level 1): Basic Structure of an Interest Rate Swap, Swap Rate, and Valuing the Swap at Initiation. Key definitions, formulas, and exam tips.
• Valuing Currency and Equity Swaps
  Valuing Currency and Equity Swaps (CFA Level 1): Key Conceptual Foundations, Anatomy of a Currency Swap, and Mechanics of Currency Swaps. Key definitions, formulas, and exam tips.
• Impact of Notional Principal, Netting, and Collateral
  Impact of Notional Principal, Netting, and Collateral (CFA Level 1): Role of Notional Principal, Why It Matters, and Netting in Swaps. Key definitions, formulas, and exam tips.
• Factors Affecting Swap Spreads
  Factors Affecting Swap Spreads (CFA Level 1): Understanding the Significance of Swap Spreads, Basics of Swap Spreads, and Key Drivers of Swap Spreads. Key definitions, formulas, and exam tips.
• Terminating or Unwinding a Swap
  Terminating or Unwinding a Swap (CFA Level 1): Reasons for Exiting a Swap Early, Key Methods of Swap Termination, and Reverse Swap (Close-Out). Key definitions, formulas, and exam tips.
• Cross-Currency Basis Swaps
  Cross-Currency Basis Swaps (CFA Level 1): How Cross-Currency Basis Swaps Work, Principal Exchanges and Notional Amounts, and Common Uses. Key definitions, formulas, and exam tips.
• Structured Swaps (Amortizing, Accreting)
  Structured Swaps (Amortizing, Accreting) (CFA Level 1): Understanding Amortizing Swaps, Understanding Accreting Swaps, and Comparing to Bullet Swaps. Key definitions, formulas, and exam tips.
• Spread Lock Agreements
  Spread Lock Agreements (CFA Level 1): Key Concepts, Mechanics of Spread Locks, and Diagram: Basic Structure of a Spread Lock. Key definitions, formulas, and exam tips.
• Butterfly, Roller-Coaster, and Other Complex Swap Structures
  Butterfly, Roller-Coaster, and Other Complex Swap Structures (CFA Level 1): Butterfly Swaps, Concept and Motivation, and How It Works. Key definitions, formulas, and exam tips.
• Central Clearing Requirements for OTC Swaps
  Central Clearing Requirements for OTC Swaps (CFA Level 1): Understanding Central Clearing, Key Regulatory Framework, and Margin Requirements: Initial and Variation. Key definitions, formulas, and exam tips.
• Market Value vs. Credit Value Adjustments in Swaps
  Market Value vs. Credit Value Adjustments in Swaps (CFA Level 1): Understanding Market Value in Swaps, Risk-Neutral Valuation in Brief, and Credit Value Adjustment (CVA). Key definitions, formulas, and exam tips.
• Derivative Valuation Adjustments: XVA (CVA, DVA, FVA, KVA)
  Derivative Valuation Adjustments: XVA (CVA, DVA, FVA, KVA) (CFA Level 1): Understanding the XVA Framework, Core Components of XVA, and CVA: Credit Value Adjustment. Key definitions, formulas, and exam tips.
• Swap Execution Facilities and Post-Trade Transparency
  Swap Execution Facilities and Post-Trade Transparency (CFA Level 1): Rise of Swap Execution Facilities, Why Not All Swaps Trade on SEFs, and Impact on Market Pricing and Liquidity. Key definitions, formulas, and exam tips.
• Equity Repo Swaps and Stock-Lending Swaps
  Equity Repo Swaps and Stock-Lending Swaps (CFA Level 1): Understanding the Framework of Equity Financing, Equity Repo Swaps: The Basics, and Key Mechanics. Key definitions, formulas, and exam tips.
• Cost-of-Funds Index Swaps
  Cost-of-Funds Index Swaps (CFA Level 1): Key Concepts and Mechanics, What Is the Cost-of-Funds Index (COFI)?, and COFI in Mortgage Lending. Key definitions, formulas, and exam tips.