Consider the situation in Example 10.1. Assuming that the intermediary charges 8 points from each of the
parties, the total gain of 30 points is shared as 16 points to the intermediary, 7 points to Company B, and
7 points to Company A, and the swap design will be as shown in Fig. 10.3.
Company A
Bill Market
Bond Market
LIBOR + 70 points
LIBOR
+ 5 points
LIBOR
+ 13 points
8.2%
8.2%8.28%
Intermediary
Company B
Figure 10.3Structure of an Interest Rate Swap through an Intermediary
Company A
Pay LIBOR + 70 points in the bill market
Pay 8.28% to the intermediary
Receive LIBOR + 5 points from the in ...
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