Editing Rational pricing (section)

====Subsequent valuation====
The Floating leg of an interest rate swap can be "decomposed" into a series of [[forward rate agreement]]s. Here, since the swap has identical payments to the FRA,  arbitrage free pricing must apply as above&nbsp;– i.e. the value of this leg is equal to the value of the corresponding FRAs. Similarly, the "receive-fixed" leg of a swap can be valued by comparison to a [[Bond (finance)|bond]] with the same schedule of payments. (Relatedly, given that their [[underlying]]s have the same cash flows, [[bond option]]s and [[swaption]]s are equatable.)  See further under {{slink|Swap (finance)#Using bond prices}}. The difference between the [[Interest rate cap and floor]] values equate to the swap value, per similar arbitrage arguments.