Financial Risk Manager Part 1

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Explanation:

The bank is receiving fixed and paying floating, so when rates fall, the swap becomes more valuable to the bank.

At $T+0.5$ years, the current exposure is the positive market value of the swap:

\text{Exposure} = \max(V,0)

Using the remaining 2.5 years and the new flat swap rate of 4.1%, the swap value is approximately:

V \approx N (K - S) A

where:

So:

V \approx 100{,}000{,}000 \times 0.009 \times 2.35 \approx 2.12\text{ million}

Therefore, the current exposure is approximately $2.12 million.

Explanation:

The bank is receiving fixed and paying floating, so when rates fall, the swap becomes more valuable to the bank.

At $T+0.5$ years, the current exposure is the positive market value of the swap:

\text{Exposure} = \max(V,0)

Using the remaining 2.5 years and the new flat swap rate of 4.1%, the swap value is approximately:

V \approx N (K - S) A

where:

So:

V \approx 100{,}000{,}000 \times 0.009 \times 2.35 \approx 2.12\text{ million}

Therefore, the current exposure is approximately $2.12 million.

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MManit

Last updated: April 18, 2026 at 11:32

Zero

45.5%

$440,000

45.5%

$2.12 million

9.1%

$102.12 million