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Contents

• Asset Swap - PDF Document

PDF Training Guide

Asset swaps provide a form of asset financing, where investors borrow funds to purchase an

asset, typically a bond. Asset swaps are also a good bond rich-cheap analysis tool. Such swaps

can of course be used for speculative purposes.

In this article we provide a brief overview of asset swaps and derive a par-par asset swap spread

formula incorporating bond accrued interest. Finally we illustrate how to calculate both the

yield-yield and par-par asset swap spread using the liquid 10 year German Bund.

Keywords: Asset Swap, Credit Risk, Asset Swap Spread, Yield-Yield Method, Par-Par Method,

Par Adjustments, Accrued Interest, Dirty Price, Clean Price