Sample Essay

Conversion from swap to outright rates is done by adding or subtracting the premium or discount from the related spot rate at the time.

Spot Rate: $1.2116 / 1.2125

1 month: Bid rate is less than ask rate. Hence it is at a premium and addition needs to take place.

Outright rate thus = $1.2146 / 1.2160

Spread percentage = 0.115%

Forward differential: Bid: 0.247%

Offer: 0.288%

3 month: Bid rate is less than ask rate. Hence it is at a premium and addition needs to take place.

Outright rate = $1.2151 / 1.2165

Spread percentage = 0.115%

Forward differential:  Bid: 0.288%

Offer: 0.329%

6 month: Bid rate is less than ask rate. Hence it is at a premium and addition needs to take place.

Outright rate = $1.2156 / 1.2170

Spread percentage = 0.115%

Forward differential:  Bid: 0.33%

Offer: 0.37

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Essay: Calculating Swap Rates
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