CMS Swap

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CMS Swap

Postby kelvin_dc200015b » Fri Jun 21, 2013 5:18 pm

Hi Professor Mark,

Are the followings correct? If yes, can you explain please?

1. The forward Libor curve shows a positive slope, which implies the yield curve is expected to flatten where short term rates get up more than long term rates.

2. A trader expects the flattening speed is quicker than the market implied one and he enters into a CMS swap paying CMS rate and receiving Libor + spread in order to benefit from his expectation.

thanks,
Kelvin
kelvin_dc200015b
 
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