plain-vanilla

David breaks down the valuation of an interest rate swap into three steps: 1. The assumptions, which includes understanding the TIMELINE; e.g., we are valuing the stop at some point after origination and it has some remaining life (in this case 15 months); 2. Extracting the implied semi-annual...

The "plain vanilla" interest rate swap is the common interest rate derivative: one counterparty, in this example Apple (who is the "fixed-rate payer") agrees to pay cash flows equal to interest at a predetermined FIXED rate on a notional amount (in this case, 3.0% per annum payable semi-annually...