Interest Rate Swap Valuation and Payment Schedule

Exchange or trade conceptual illustration

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An interest rate swap acts just like it sounds. One entity pays a fixed interest rate to another. They then receive a variable interest rate from that entity. Based on how the variable rate changes, it will determine the difference in cash flows over time and who is paid what and when.

You also have the valuation aspect. It is possible for one side to have to pay more to the other, but the side receiving more cash flow over time actually ends up with a lower net present value because the increase in cash flows to them happens further out in time. This would be driven by the discount rate assumption as well as the amount you expect Libor to change and when you expect that change to happen. All are editable variables within this model.

There are charts to show the accumulated net present value of both variable / fixed legs as well as the non-discounted cash value and the payment schedule of both fixed/variable legs over time (i.e. who pays what to who and when) based on assumptions.

 

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Summary Compare fixed and variable legs of an interest rate swap.
Screenshots / Pictures Interest rate swap valuation
Interest rate swap valuation and payment schedule
accumulated net present value of future cash flow variable
Interest rate swap valuation
floating interest rate schedule
fixed interest rate schedule
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