Matching: A → 3, B → 1, C → 2

Where the confusion is coming from

The labels describe what each party pays

Matching: A → 3, B → 1, C → 2

Where the confusion is coming from

The labels describe what each party pays on the swap, not what they were paying before it. That’s the whole thing.

• Fixed-rate payer = pays fixed, receives MRR
• Floating-rate payer = pays MRR, receives fixed

In your setup, if A is the fixed-rate payer, then A pays fixed to B and receives floating from B. You’ve written it the other way round — A paying variable and B paying fixed — which is actually the definition of B being the fixed-rate payer. Once you flip that back, the answer falls out.

Why A gets the net payment when MRR > fixed

Take a 5% fixed rate, notional 100.

Say MRR settles at 7%:

• A owes 5, B owes 7 → net 2 flows to A. The fixed-rate payer receives.

Say MRR settles at 3%:

• A owes 5, B owes 3 → net 2 flows to B. The fixed-rate payer pays.

So the fixed-rate payer gains when rates rise. That’s intuitive — A has locked in a 5% cost, and rates going to 7% means A locked in cheap. The swap pays A the difference.

On C (statement 2)

Mark-to-market cuts both ways for both parties, so it applies to both. At initiation the swap is priced at zero value. If rates rise afterwards, the fixed-rate payer has positive MTM and the floating-rate payer negative; if rates fall, the reverse. Over the life of the swap either party can sit on either side of that.

Quick memory hook: you are named by the leg you pay. Fixed-rate payer pays fixed, so rising rates help them.