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YouTube T3-31: Comparative advantage in an interest rate swap

Nicole Seaman

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AAACorp has a comparative advantage in fixed-rate markets, but BBBCorp has a comparative advantage in floating-rate markets (even as it pays more everwhere!). The difference in spreads (in this case, the difference is 0.50% = 1.20% - 0.70%) is the gross total advantage that can be conferred.

David's XLS is here: https://trtl.bz/2DceGc6

 
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