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an interest rate swap is a financial contract in which one side receives a series of fixed rate payments and the other side receives a series of floating rate payments the value to both sides should initially be zero but because this is a zero-sum game after some time passes and how rates change in the market one side will gain exactly what the other side loses this isnt actually a very easy contract to value so lets hop into excel and take a look at it every interest rate swap has a notional principal amount that the swap is based on for this example well use a value of 10 million dollars and well also use the assumption that this the fixed rate side of this swap pays a 3.5 percent were also going to use an assumed treasury curve so you can see down here i have a graph of that treasury curve and its just saying that the treasury rate for six months in the future is three percent one year in the future its four percent etc now lets say that the floating rate side of this swap i