Hedging Series: “How Is The Fixed Swap Rate Determined” [Chapter 6]
How is the fixed swap rate determined? The fixed swap rate is equal to where LIBOR is expected to average over that time horizon present valued back to today. So a three year swap rate equals where the market expects LIBOR to average over the next three years present valued back to today.
This is the sixth video — focusing on, “How Is The Fixed Swap Rate Determined” — in a series of eight episodes on the topic of Hedging presented by Jillian Mariutti.
Watch the previous chapters below: