5.18 Total gain from an Interest Rate Swap The total gain from an interest rate swap is always la-b where a is the difference between the interest rates in the fixed-rate market for the two parties, and b is the difference between the interest rates in the floating-rate market for the two parties In this example a=1.20% and b=0.70% Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 5.18 Total Gain from an Interest Rate Swap • The total gain from an interest rate swap is always |a-b| where • a is the difference between the interest rates in the fixed-rate market for the two parties, and • b is the difference between the interest rates in the floating-rate market for the two parties • In this example a=1.20% and b=0.70%