ch 5 asset packaging

7/25/2019 Ch 5 Asset Packaging

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Worksheet Title

5.1 Market data

5.2 Diagram of the Impact of the Accord on Capita5.3 Creating a simple Par asset swap with a bond tr

5. Creating a simple Par mat!rit" asset swap with

5.5 Creating a simple disco!nt asset swap with a b

5.# $orward %al!ing an Asset &wap


2/13

'orksheet (.13 Inflation )edging


3/13

ading below par

a bond trading below par

nd trading below par


4/13


5/13

5.1: Market data

Today's date: 4-Feb-08

Settlement 2

Day z-c rates gradient

count

0 3.2!" 0.0000

0.0# 3.2!" -0.00!40.08 3.$$" -0.002!

0.2%0 3.33" -0.0023

0.%0! 3.0$3" -0.004!

0.$! 2.#%%" -0.0040

.0$ 2.8%4" -0.002$

.2!4 2.$8$" -0.00!

.%# 2.$48" -0.0004

.$$% 2.$3$" 0.000$

2.03! 2.$%%" 0.008

2.2$8 2.$#8" 0.0024

2.%33 2.8!0" 0.002!

2.$#4 2.#2#" 0.002!

3.04$ 2.##%" 0.002%

3.2#2 3.0%$" 0.0024

3.%%3 3.20" 0.0024

3.80! 3.80" 0.0023

4.0%8 3.23#" 0.00234.3 3.2#8" 0.0023

4.%!4 3.3%$" 0.0023

4.8# 3.4$" 0.0023

%.0$% 3.4$%" 0.0023

%.322 3.%3" 0.0022

%.%$8 3.%88" 0.002

%.833 3.!43" 0.0020

!.08# 3.!#%" 0.00#!.33! 3.$42" 0.008

!.%#2 3.$8#" 0.00$

!.84$ 3.833" 0.00!


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0.#0! 4.3!8" 0.000

.! 4.3#3" 0.000#

.408 4.4!" 0.000#.!!4 4.43#" 0.000#

.## 4.4!" 0.0008

2.$% 4.483" 0.0008

2.42% 4.%03" 0.0008

2.!8 4.%24" 0.0008

2.#3! 4.%44" 0.0008

3.#$ 4.%!4" 0.000$

3.43# 4.%82" 0.000$

3.!#4 4.!00" 0.000$

3.#%! 4.!8" 0.000$

4.208 4.!34" 0.000!

4.4%3 4.!%0" 0.000!

4.$4 4.!!!" 0.000!

4.#!$ 4.!80" 0.000%

%.2# 4.!#4" 0.000%

%.4$2 4.$0$" 0.000%

%.$2% 4.$#" 0.000%

%.#$8 4.$30" 0.0004

!.233 4.$4" 0.0004

!.483 4.$%2" 0.0004

!.$3# 4.$!" 0.0004

!.##4 4.$$" 0.0003

$.2%0 4.$80" 0.0003

$.4#$ 4.$88" 0.0003

$.$%3 4.$#%" 0.00038.008 4.803" 0.0003

8.2!4 4.80" 0.0003

8.% 4.8!" 0.0002

8.$!$ 4.823" 0.0002

#.022 4.82#" 0.0002

#.283 4.834" 0.0002

#.%2% 4.83#" 0.0002

#.$8 4.844" 0.000220.042 4.84#" 0.0002

20.2#4 4.8%4" 0.0002

20.%4$ 4.8%8" 0.0002


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24.!00 4.8#!" 0.0000

24.8%! 4.8#!" 0.0000

2%.$ 4.8#$" 0.00002%.3!# 4.8#$" 0.0000

2%.!4 4.8#$" 0.0000

2%.8$% 4.8#$" 0.0000

2!.28 4.8#$" 0.0000

2!.38 4.8#$" 0.0000

2!.!33 4.8#!" 0.0000

2!.88! 4.8#!" 0.0000

2$.3# 4.8#%" 0.0000

2$.3#4 4.8#4" 0.0000

2$.!44 4.8#4" 0.0000

2$.8#$ 4.8#3" 0.0000

28.%3 4.8#2" 0.0000

28.408 4.8#" 0.0000

28.!%8 4.8#0" 0.0000

28.#4 4.88#" 0.0000

2#.!# 4.888" 0.0000

2#.42% 4.88$" 0.0000

2#.!$2 4.88!" 0.0000

2#.#28 4.88%" 0.0000

30.83 4.884" 0.0000

30.444 4.882"


8/13

5.2: Diagram of the

*.

*.*5

+ating

1 AAA *.2 5

2 AA 1.12 53 A 2.1# 5

,,, 3.-1 5

5 ,, #.*3 5

# , . 5

- CCC 1.# 5

( CC 22.3 5

C 33.(1 51* D 5*. 5

AAA

Capital


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mpact of the Accord on Capital

AA A BBB BB B CCC CC C D

Diagram 5.1: Impact of the Accord on Capital

Economic Capital

Regulatory Capital


10/13

5.3: Creating a simple Par asset swap with a bond trading below par

Today's date = 4-Feb-0

Bond details:

Maturity = 10-Jan-13coupon = 10.25% SA

redemption = 100

clean price = 3.0000 Creating a simple Par ass

!ime to ne"t coupon *.2(

accrued interest = 2.32#

dirty price = 5.32#

$!M 11.-*5/

&wap Da"co!nt I,0+ I,0+ Da"co!nt

dates Act3#*4 6c rates D$s Act3#*4,ond Da"co!nt I,0+ I,0+ ,ond &wap cashflows 7ield6based

dates Act3#*4 6c rates D$s cashflows IF Approach NP Approach D$s

:1; :2;

#6$eb6*( 1 6.*#- 5.32# 1 #6$eb6*( 1

65 1*6

6( 12662 1*6

63# 116

612 1*6

1160ct61* 2.-1- 2.*(/ *.2*3- *.253 =ib

%al!e of =eg 651.15 635.31- 1*61*60ct611 3.-2( 3.1#1/ *.((((3# *.253 =ib1*61*60ct612 .- 3.3/ *.(51*#* *.25# =ib


11/13

5.4: Creating a simple Par mat!rity asset swap with a bond trading below par


Bond details:

Maturity = 10-Jan-13

coupon = 10.25% SA

redemption = 100

clean price = 3.0000


accrued interest = 2.32#

dirty price = 5.32# &wap Implied &wap

&wap I,0+ Da"co!nt cashflows $orward cashflowsdates D$s Act3#*4 receie side rates receie side

,ond Da"co!nt I,0+ ,ond &wap cashflows IF Approach NP Appr

dates Act3#*4 D$s cashflows IF Approach NP Approach

margin 89 55."2 5

:1; :2; :3; :;

#6$eb6*( 1 6.*#- 5.32# #6$eb6*( 1

65 1*6 margin 2.52*/ 2.*5 1.

62 1*6 margin 2.55(/ 2.5(3 1.

61( 116 margin 2.#(1/ 2.#15- 1.

612 1*6 margin 2.((-/ 2.-2# 1.

6# 1*6 margin 3.(3/ 2.-(51 1.(6A!g611 *.(5*(* *.2#1 =ibor > margin 3.35/ 3.**** 1.

-6@o611 *.((#*33 *.253 =ibor > margin .*3/ 2.3*# 1.

#6$eb612 *.(-#(3* *.253 =ibor > margin .152/ 2.51 1.

-6Ma"612 *.(#-#* *.253 =ibor > margin .2-3/ 2.(( 1.

#6A!g612 *.(5-3 *.253 =ibor > margin .3*/ 3.*12 1.

#6@o612 *.((1(1 *.25# =ibor > margin .5*2/ 3.*(1* 1.

#6$eb613 *.(3(3*( *.25# =ibor > margin .#*/ 1*3.1*(3 1.

? 8 .#-5 %al!e of =eg 135.31#- 35.

Margin 8 55."2 @et P% 8 *.**** *.

+ed!ction in Margin 61.3/

Increase in ? 1.35/


12/13

5.5: Creating a simple dis"o!nt asset swap with a bond trading below par


Bond details:


coupon = 10.25% SA

redemption = 100


Mone" receied from inestor *


accrued interest = 2.32# &wap Implied &wap

dirty price = 5.32# &wap I,0+ Da"co!nt cashflows $orward cashflows

$!M 11.-*5/ dates D$s Act3#*4 receie side rates receie side

IF Approach NP Ap

,ond Da"co!nt I,0+ ,ond &wap cashflows

dates Act3#*4 D$s cashflows IF Approach NP Approach margin 89 #5$.2

:1; :2; :3; :;

#6$eb6*( 1 5.32# 5.32# #6$eb6*( 1

65 1*6 margin 3.1#1/ 1.(##(

6( 126

62 1*6 margin 2.(3*/ 2.#*-#

63# 116

62 1*6

61( 116 margin 2.#*/ 2.#1#

612 1*6

* 1*6

1160ct61* *.2*3- *.253 =ibor > margin 3.55(/ 2.-(

%al!e of =eg 6.#*- 635.31- 1*6 margin 3.-1*/ 2.--

116Apr611 *.*#-*( *.253 =ibor > margin 3.(15/ 2.(*33

116 margin 3.*-/ 2.(22

1*60ct611 *.((((3# *.253 =ibor > margin .**(/ 2.(-2

1*6 margin .11(/ 2.*3

1*6Apr612 *.(-*25- *.253 =ibor > margin .23-/ 2.(

1*6 margin .355/ 2.2#2

1*60ct612 *.(51*#* *.25# =ibor > margin .#/ 2.(5

1*6 margin .5--/ 3.**5

? 8 .#13 %al!e of =eg .#*# 3

Margin 8 #5$.2 @et P% 8 *.****


13/13

5.#: Forward $al!ing an %sset &wap


Bond details:


coupon = 10.25% SA

redemption = 100


Mone" receied from inestor *

Implicit %orro&ing margin 5$ bp pa.


accrued interest = 2.32# &wap Implied &wap Mone"

dirty price = 5.32# &wap I,0+ Da"co!nt cashflows $orward cashflows acco!nt$!M 11.-*5/ dates D$s Act3#*4 receie side rates receie side from po of swap cp4

IF Approach

,ond Da"co!nt I,0+ ,ond &wap cashflows

dates Act3#*4 D$s cashflows IF Approach margin 89 #"!."$

:1; :2; :3;

#6$eb6*( 1 5.32# #6$eb6*( 1 65.32#

65 1*6Apr6*( *.13 *.1-( =ibor > margin 3.1#1/ 1.(5 6-.(312

6( 1*6 margin 3.*#*/ 2.#21- 65.3(3

62 1*60ct6*( *.-# *.25# =ibor > margin 2.(3*/ 2.5-- 6(.*2*63# 126 margin 2.525/ 2.1-5 6(.*25

62 1*6 margin 2.52/ 2.5*3 65.(33

61( 1260ct6* *.53 *.2#1 =ibor > margin 2.#*/ 2.#* 6(.13--

612 116 margin 3.*(5/ 2.#2- 6(.32-(

* 126 margin 3.35/ 2.#((# 65.-25

1160ct61* *.2*3- *.253 =ibor > margin 3.55(/ 2.-35* 6(.-#((

1*6 margin 3.(15/ 2.-35 6.3-11116 margin 3.*-/ 2.(1 6-.1#(

1*60ct611 *.((((3# *.253 =ibor > margin .**(/ 2.(3- 61*.*(3

1*6 margin .23-/ 2.((# 61*.5#

1*6 margin .355/ 2.1# 6(.((2(

1*60ct612 *.(51*#* *.25# =ibor > margin .#/ 2.-# 611.-*1

1*6

ch 5 asset packaging

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