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Derivatives

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  • April 17, 2021
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Par Swap Rate

The rate which renders a swap value equal to zero. That is, the value of the fixed rate which gives the swap a zero present value, or the fixed rate that will make the value of both legs equal (i.e., the value of the fixed leg and the value of the floating leg). The swap par rate is calculated by finding the value of the fixed leg (this is done by discounting the forward rates of the floating rate to the present date). Then, by discounting the resulting rates and adjusting the fixed rate until the the net present value of the swap is will be equal to zero.


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