R29 Swaps - Quick Help

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This part of the reading is really annoying me as I can’t get my head around it - Managing duration of FI portfolio using Swaps
How does one arrive at duration of float side payments? eg. EOC Q2
  • Duration of 4 yr pay float and rec fixed swap with quarterly payments is Float - 0.125, Fixed - 0.75x4
  • Duration of 3 yr Swap and semiannual payments - float - 0.25, Fixed - 0.75x3
I can’t seem to get the equivalent BB problem and some of the preceeding text too. Am I missing something obvious here? Can someone help here?
Appreciate it.
 
the duration a of floating swap payment is the amount of time between reset dates. In the case of the quarterly pay swap, the period between reset dates is a 3 months (i.e. 0.25). Covention is to use half the period between reset dates, or 0.125.
In the case of the semi-annual pay swap, the duration is 0.50. So, half the period between reset dates would be 0.25.
 
Would You Look at That wrote:the duration a of floating swap payment is the amount of time between reset dates. In the case of the quarterly pay swap, the duration is 0.25. Covention is to use half the duration of the floating rate duration, or 0.125.
In the case of the semi-annual pay swap, the duration is 0.50. So, half the duration of the floating rate duration would be 0.25.
Click to expand...
Your conclusions are correct, but your explanation is off: the floating rate duration is half the time between resets, and you use that amount: 0.25 years for semiannual pay swaps, 0.125 years for quarterly pay swaps, and so on.
 
SWAP duration:
Variable leg = half of resetting period, ie 0.125 for quarterly reset, 0.25 for semiannual reset
Fixed leg = assumed to be 0.75 x (# of years)
(+) sign for receiving, (-) sign for paying
so if receive fix & pay variable = higher duration
 
S2000magician wrote:
Would You Look at That wrote:the duration a of floating swap payment is the amount of time between reset dates. In the case of the quarterly pay swap, the period between reset dates is a 3 months (i.e. 0.25). Covention is to use half the period between reset dates, or 0.125.
In the case of the semi-annual pay swap, the duration is 0.50. So, half the period between reset dates would be 0.25.
Click to expand...
Your conclusions are correct, but your explanation is off: the floating rate duration is half the time between resets, and you use that amount: 0.25 years for semiannual pay swaps, 0.125 years for quarterly pay swaps, and so on.
Click to expand...
thanks, S2000
 
thanks a bunch guys, thats helps. Just another thing thats needs to be crammed in at this stage.
S2000magician - thank you. As always you never fail to help. Appreciate !
 
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