5.4 An Example of a"Plain vanilla Interest Rate Swap(大众型利率互换) An agreement by"Company B"to RECEIVE 6-month libor and PAY a fixed rate of 5% pa every 6 months for 3 years on a notional principal of $100 million Next slide illustrates cash flows, Where POSIT/VE flows are revenues(inflows) and NEGATIVE flows are expenses(outflows) 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 5.4 An Example of a “Plain Vanilla” Interest Rate Swap(大众型利率互换) • An agreement by “Company B” to RECEIVE 6-month LIBOR and PAY a fixed rate of 5% pa every 6 months for 3 years on a notional principal of $100 million • Next slide illustrates cash flows, where POSITIVE flows are revenues (inflows) and NEGATIVE flows are expenses (outflows)