Valuing Plain Vanilla Interest Rate Swaps

Somewhat surprisingly, a plain vanilla interest rate swap is one of the easiest derivatives to value; once again, as with all derivatives, the formula for the value is: \[Value\ =\ PV\left(what\ you\ will\ receive\right)\ –\ PV\left(what\ you\ will\ pay\right)\] Because the swap is equivalent to two bonds (one long, one short, one fixed, one floating), […]