In an existing (not new) interest rate swap, your company receives 3.50% (fixed) per annum and pays 3-month LIBOR in return on a notional principal of $100 million with cash payments being exchanged every 3 months. The swap contract has a remaining life of 14 months so the next cash exchanges will happen in 2 months, 5 months, 8 months, 11 months and 14 months. The last cash exchange happened 1 month ago and the 3-month LIBOR was 3.00% per annum with quarterly compounding. The current LIBOR rates for different maturities are given as follows.
Maturity |
LIBOR per annum with continuous compounding |
2 months |
2.75% |
5 months |
3.00% |
8 months |
3.25% |
11 months |
3.50% |
14 months |
3.75% |
What is the current value of this swap to your company?