IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v17y1992i1p1-7.html
   My bibliography  Save this article

Yield Reversals and the Yin-Yang Trap: A Note on Time Valuation and Interest Rate Swaps

Author

Listed:
  • Roger J. Bowden

    (School of Banking and Finance, University of New South Wales, P.O. Box 1, Kensington NSW 2033.)

Abstract

The time value function for a vanilla interest rate swap is derived in this note. For monotonic and stationary yield curves, value is zero at the end points and either wholly negative or wholly positive over the life of the swap. But reversals in the term structure of interest rates from inverted to normal produce a swing between positive and negative values and result in an apparently alarming loss of value in an exposed swap. This rationalises recent profitability loss in unmatched swaps books.

Suggested Citation

  • Roger J. Bowden, 1992. "Yield Reversals and the Yin-Yang Trap: A Note on Time Valuation and Interest Rate Swaps," Australian Journal of Management, Australian School of Business, vol. 17(1), pages 1-7, June.
    • Handle: RePEc:sae:ausman:v:17:y:1992:i:1:p:1-7
    DOI: 10.1177/031289629201700101
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/031289629201700101
    Download Restriction: no
    File URL: https://libkey.io/10.1177/031289629201700101?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:17:y:1992:i:1:p:1-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.