Today is Monday, April 25, 2016. You are a customer ready to trade swaps.You exe

Question

Today is Monday, April 25, 2016. You are a customer ready to trade swaps.You execute a new receive fixed/pay floating swap with a 5-year tenor and $10 million notional amount.

You trade this swap under standard terms at a fixed rate of 1.318828%. 3-month LIBOR was set the same morning in London at 0.63585%.

Under the standard terms of this deal, how much will you have to pay the dealer at the time of the trade to enter this transaction?

A.   The usual $1,000 commission
B.    $10,000 because this swap has a $10 million notional amount
C.    The usual $1,000 commission is paid on the maturity date of the swap
D.   $0, because this deal isn't very valuable

Explanation / Answer

A.   The usual $1,000 commission

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