Question: Today is 1st of January. The residual maturity of a swap is 9 months. The notional principal is $1,000. You receive 3% fixed semiannual payments and pay semiannual cash flows based on the 6-month Libor rate on March 31st and September 30th. Next payment is based on Libor at 5%. The current term structure is R(0, 0.25) = 4% and R(0, 0.75) = 5%.

Find the value of the fixed leg, floating leg and the swap.

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-module(swap).

-export([example1/0]).

example1() ->
    Fixed = example1_fixedleg(),
    Floating = example1_floatingleg(),
    {Fixed, Floating, Fixed-Floating}.

example1_fixedleg() ->
    30 / math:pow(1+0.04, 1/4) + 1030/math:pow(1+0.05, 3/4).

example1_floatingleg() ->
    % 25 - next floating cash-flow payment 
    % 1000 - the notional as if it is a zero-coupon bond
    25 / math:pow(1+0.05, 1/4) + 1000/math:pow(1+0.05, 1/4).

Answer: {1022.6981406074298,1012.5734611086509,10.124679498778846}