Derivative Bank entered into a plain vanilla swap through on OIS (Overnight Index Swap) on a principal of 10 crores and agreed to receive MIBOR…

CA Final · Advanced Financial Management · MTP · May 2026
Derivative Bank entered into a plain vanilla swap through on OIS (Overnight Index Swap) on a principal of 10 crores and agreed to receive MIBOR overnight floating rate for a fixed payment on the principal. The swap was entered into on Monday, 2nd August, 2010 and was to commence on 3rd August, 2010 and run for a period of 7 days. Respective MIBOR rates for Tuesday to Monday were: 7.75%,8.15%,8.12%,7.95%,7.98%,8.15%. If Derivative Bank received 317net on settlement, calculate Fixed rate and interest under both legs. Notes: Sunday is Holiday.Work in rounded rupees and avoid decimal working.Assume 365 days a year.

Suggested Answer and Working Notes:

Day Principal (₹) MIBOR (%) Interest (₹) Tuesday 10,00,00,000 7.75 21,233 Wednesday 10,00,21,233 8.15 22,334 Thursday 10,00,43,567 8.12 22,256 Friday 10,00,65,823 7.95 21,795 Saturday & Sunday (*) 10,00,87,618 7.98 43,764 Monday 10,01,31,382 8.15 22,358 Total Interest @ Floating 1,53,740 Less: Net Received 317 Expected Interest @ Fixed 1,53,423 Thus Fixed Rate of Interest 0.07999914 Approx. 8% (*) i.e. interest for two days.

Topics: Derivatives Analysis & Valuation

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