2009 Q18 is a question about a 5 yr currency swap between a financial institution and company XYZ. Company XYZ goes bankrupt right before the 3rd yr payment.
The solution ends up giving the value of the swap, from the financial institution's perspective, as .46 million. However, if XYZ has just gone bankrupt, wouldn't the value of the swap be 0? XYZ is not around any longer to make the payments the give the swap it's value.
If XYZ had not gone bankrupt, I would agree with the solution.
The solution ends up giving the value of the swap, from the financial institution's perspective, as .46 million. However, if XYZ has just gone bankrupt, wouldn't the value of the swap be 0? XYZ is not around any longer to make the payments the give the swap it's value.
If XYZ had not gone bankrupt, I would agree with the solution.
2009 Q18 - swaps
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