[Verse 1]
When swap contracts first see daylight, zero value starts the game
Fixed leg meets the floating ribbon, both sides balanced just the same
Market rates become the anchor, no money changes hands today
But tomorrow brings the shifting, as the interest waters sway
[Chorus]
Zero at start, then drift apart
As rates climb high or tumble down
Present value tells the story
Which side wears the golden crown
Fixed pays more when rates fall low
Floating wins when rates take flight
Swap valuation dancing nightly
With each market rate's new sight
[Verse 2]
Take two bonds and flip the signal, long the fixed and short the float
Present value of cash payments shows which way the scale will vote
If the market climbs above you, floating leg gains all the power
Fixed rate holder pays the difference, bitter pills in sweeter hour
[Chorus]
Zero at start, then drift apart
As rates climb high or tumble down
Present value tells the story
Which side wears the golden crown
Fixed pays more when rates fall low
Floating wins when rates take flight
Swap valuation dancing nightly
With each market rate's new sight
[Bridge]
Discount every future payment
Back to present using curves
Fixed leg stays forever constant
Floating leg bends and swerves
Net present value difference
Shows the winner of the trade
[Final Chorus]
Zero at start, then drift apart
As rates climb high or tumble down
Present value tells the story
Which side wears the golden crown
[Outro]
Two legs walking different rhythms
One stays steady, one takes turns
In the swap valuation kingdom
Every rate movement earns