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# R19.P1.T3.HULL Ch7 Currency Swap Valuation XLS

##### Active Member
In reference to R19.P1.T3.FIN_PRODS_HULL_Ch7_Currency_Swap_Valuation
Eg2:-

Currency Swap Valuation -Eg 1 in the prior tab is perfectly good. But I had some questions on the 2nd Example for the Currency Swap Valuation. I see 2 different Net Swap Values for the 2 methodologies - $2.71 in the Bond Methodology and$ .6121 in the FRA Method. Also, in The Bond method, the valuation is just for Time = 10...where are the other years..? Why are we not factoring them in..?

Also why are the Time values Row 16 ( F16 to K16 ) = Row 17 ( F17 to K17 ) - 5 ...?

Much gratitude.

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#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
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Hi @gargi.adhikari It took me a while to figure out how the heck this sheet got so messed up, sorry. I probably need to remove this sheet or clean it up. I finally discovered it was my hasty attempt to answer Hull's Question 7.12, which I probably should not have shared to the learning XLS. Here is Hull's question which I was attempting to answer:
For the 2nd Bond-Value: N=4 , I/Y = 3% , PMT = 30,000, FV= 10,000,000 => CPT PV- But I am getting PV as 7,449,662 instead of $10.3 Mil What am I missing here ...? View attachment 1671 Hello @gargi.adhikari Here are a few other threads in the forum that might help you: #### gargi.adhikari ##### Active Member Thanks @Nicole Seaman for the links above - I did check them out... I was trying to use the same techniques to calculate the Prices of the 2 Bonds for the Currency Swap Valuation- but the answer I am getting is way different than if worked out by hand somehow....and so I was trying to see if I was plugging some no wrong or was it because the PMT = 560,000 is such a minuscule fraction of the FV Value of$7 Mil that the calculator is approximating the Bond Price to 7 Mil.

I also am getting the 2nd Bond Price as 7,449,662 instead of \$ 10.3 Mil

I did try changing the Decimal Precision settings on my calculator to different decimal places- but that did not help....what else am I doing wrong- because for Currency Swap Valuations in the exam I would prefer to use the Bond approach and then would prefer to find the Bond Prices on the calculator (instead of spending time on doing them manually)and then just find the Net Swap value as the difference of those 2 Bond prices..

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
@gargi.adhikari your TVM assumes the first payment at the end of the first year (aka, end-of-payments, or in arrears) but notice how the first 560,000 pays immediately and has the same PV. So your timing doesn't match. I'm in a total rush at the moment but if i get a chance i'll post later with keystrokes. The beginning/end is changed in the calculator with: [2nd] [BGN] [2nd] [SET]