PPT Slide
Fixed leg is made up by payments Bi paid at time ti+1
Floating leg consists of payment Ai at time ti+1 where
Since the realization at time ti of the spot rate is not known at time 0,
where P(t, T) is the price at time t of a discount bond maturing at time T.
Let Fi denote the forward rate between [ti, ti+1] agreed at time 0. By the
compounding rule of discounting