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How Floating-Rate Fixings Affect Swap Value and Sensitivity

Article Quant Q&A · Author: Jaya Mohan
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Summary

The document asks whether a fixing date changes the value or interest-rate sensitivity of fixed-for-floating interest rate swaps and cross-currency swaps. The response says that a fixing does not directly change the floating leg’s price under the stated forward-rate discounting view, but it can affect interest-rate sensitivity.

It characterizes the floating leg’s duration near a fixing as approximately the duration of a zero-coupon bond maturing at the next payment date. This offers a compact intuition for why the remaining exposure is concentrated around the next cash flow. The answer is brief and does not derive the result, specify conventions or market assumptions, or separately analyze cross-currency swap mechanics. It should be treated as a limited conceptual explanation rather than a complete valuation treatment.

Key ideas

  • A fixing date is described as affecting the floating leg’s rate sensitivity rather than directly changing its price.
  • Near a fixing, the floating leg’s duration is approximated by that of a zero-coupon bond maturing at the next payment.
  • The response frames floating-leg pricing through discounted forward rates.
  • The brief answer does not detail cross-currency effects or the assumptions behind its approximation.

Tags

Fixed incomeDerivatives pricingRisk management
Full text
# Impact of fixing on the valuation of derivatives


# Impact of fixing on the valuation of derivatives












I would like to know what is the impact of a fixing on the value of a fixed vs floating interest rate swap (IRS). Also, I have the same question about the fixing impact on a cross currency swap?

On a fixing date, does the value of the swap decrease ? Is there any change in the interest rate sensitivity?

## Answer by Nasser Bin (score 2)

https://quant.stackexchange.com/a/58873

It is not very clear what you are asking. On fixing date, the floating leg has a duration that is approx. the duration of a ZCB with maturity equal to the next payment. Anyway, the pricing of the floating leg is always the discounting of forward rates so the fixing date has not a direct impact on the price but rather on the interest rate sensitivity.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.