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1answer
15 views

How to build a cross currency swap pricer?

We're looking to build a pricer to convert a funding spread in a given currency over a specific funding basis e.g. 20 bps EUR 3m€ and convert it to a funding spread to a different currency with a ...
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0answers
18 views

Modeling the distrubution of future swap rates

I'm interested in better understanding the unwind cost/value of a swap at various points in the future. Suppose that we have entered a 7Y swap (paying fixed) and want to understand the unwind ...
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2answers
18 views

Pricing of Interest rate swap with start ex. 01/06/2015 to 03/06/2015 - 2 extra days? Change discount factor and fixed payments?

I hope you can help me. So let say we have an interest rate swap, with the following characteristic: Start in 30/06/2015. End in 02/07/2019 It has fixed payment every year, and floating every ...
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0answers
19 views

How to run swapbyzero matlab function in a loop [closed]

I made a for loop in Matlab in which I price a swap by using the swapbyzero function. The swapbyzero function requires a rates structure created by using the intenvset function from matlab. The ...
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3answers
99 views

Cross Currency Swap

1) What is the difference between Cross Currency Swap and Cross Currency Basis Swap? Appreciate if this can be explained in layman's terms. 2) Could you advise me which swap rate to be used for the ...
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1answer
67 views

Why can a swap option be regarded as a type of Bond option?

Why can a swap option be regarded as a type of bond option? My idea: Suppose the swap rate of the swaption is $s$. Now consider a bond option expiring at $T$ with strike, $(P_K)_t = ...
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3answers
83 views

Interest Rate Convexity - Fundamental Question

I have a very basic question around convexity adjustments in swap valuations. I am comfortable with the mathematical derivation of the convexity adjustment. My question relates to when and why a ...
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1answer
53 views

Parametric VaR of a portfolio including a swap

I am calcualting the parametric VaR of a portfolio that includes among other things an IRS swap that begins in the exact same day the valuation is done. Therefore, its NPV is 0 and I do not which ...
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0answers
34 views

Price compounding: Swap versus Governments Bonds

There are different rates curve to compound prices. Since the crisis, regulators tends to favor price compounding with swap curves over IR curves deduced from governments bonds (EU regulators, french ...
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3answers
37 views

Swap curve and short maturities

Consider USD Libor 3M swap curve. There are different maturities: 2d, 1m, 3m, 6m, 9m, 1y, 18m etc. The values for 3m, 6m, 9m etc. time buckets are just swap rates for swaps with floating leg equal ...
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1answer
44 views

ACT/360 day convention in swap pricing

The floating leg of a USD swap has present value $$ PV = \sum_{i=1}^N \delta_i f_i p^d(t_i) $$ where the $\{t_i\}$ are the floating leg payment dates, $\delta_i$ is the accrual fraction between ...
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0answers
33 views

Reset Date standard for ICP (Indice Camara Promedio) trade

What is the Reset Date standard for ICP (Indice Camara Promedio) trade? Trade Currencies are USD v/s CLP. Please provide the ISDA link if there are any amendments to ISDA standards.
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1answer
54 views

By swap valuation, is accrued interest calculated?

If I treat the 2 legs as bonds, and I want to calculate the present value somewhere between 2 payment date, should I calculate accrued interest?
3
votes
2answers
46 views

Swap rate calculation if reference rate differs from risk free rates

I want to find a swap rate, for an IRS where the floating is Libor+x bp where x is a constant. I have a risk free curve which is not the libor curve. I also have the libor rates. How can I calculate ...
3
votes
1answer
48 views

Why is there an upper limit on the premium of an ATM (!) call swaption in the Black76 model?

Trying to imply Black76 (where the forward swap rate is log-normal) volatilities as Bloomberg does in their VCUB screen we see holes at two regions: at short maturities due to negative rates which ...
0
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1answer
32 views

Is the value of fixed swap leg independent of X, where the Floating Rate is say, LIBOR minus X%?

In my texts of swap valuation, the fixed leg is decided by calculating the following equation, say for a swap agreement where: Fixed Leg : $s(1)=s(t)$ Floating Leg : 1 year LIBOR - 25bps Term = 2 ...
3
votes
1answer
51 views

Valuation of option on amortized IR swap

I'm currently valuing swaptions using an implied volatility surface and Black's formula. This formula is given by $$A (S\Phi(d_+) - K \Phi(d_-))$$ where $$ d_{\pm} = \frac{\log\left(S/K\right) \pm ...
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0answers
59 views

One Way CSA Agreements

This is probably an older topic but I don't seem to find any related threads on this forum. What is the best way to value, let's say, a vanilla IR swap (you receive fixed) that you trade against a ...
3
votes
1answer
83 views

What is mathematically rigorous way to estimate floating swap cash flow in the future?

In vanilla swap, the FL payments is fixed on one date and paid on the next reset date. So the next payment is known. However, the payment after that is not known. What would be the best estimate of ...
3
votes
2answers
96 views

If floating leg in an arrears swap is paid on the date then valuing them is like predicting future

From what I am reading arrears swap are paid on the same day(actually, +2 business days for JPY and USD) as the reset date. To me then, a week before the reset date the floating rate is not known. ...
3
votes
2answers
183 views

Why does the valuation of the floating leg of a swap only use the next payment?

At time $t=0$, swap has zero cost. In fact, both parties may have valued the swap differently based on their zero swap curve-but somehow they agreed. Once a swap is agreed upon it cannot be dissolved ...
3
votes
1answer
99 views

Something is wrong with my MtM calculation

I'm trying to value a super simple receiver swap immediately after the first swap settlement (1 year in). The given answer is -1.91 million to the floating rate payer, but I am not coming up with ...
1
vote
1answer
60 views

Immunization: Whats the best way to hedge my short interest rate exposure?

What's the best way to hedge a portfolio against a rise in rates? Portfolio: long bonds different maturities. a) parallel shift b) convex shift (short and long term rise more than mid term) How is ...
2
votes
1answer
138 views

Derive OIS rate from IRS rate and Fed Funds/Libor basis spread

For example I have 7Y interest rate swap rate and 7Y Fed funds/Libor basis spread. What is the step-by-step procedure to derive OIS rate from these two?
4
votes
1answer
849 views

Why using the swap curve as riskfree rate and no longer gov bonds?

I recently had an interview where I was asked what to use as risk-free rate. In all my textbooks it was always the US treasury yield curve. But they said no its now the "swap curve". Why is the swap ...
1
vote
2answers
152 views

what data to use to compare the interest rate among different currencies?

Very new to fixed income signals. I am a little confused about which data to use to compare interest rate among different currencies. For example, I am interested in compare interest rate in the ...
0
votes
0answers
135 views

How to optimally hedge construction loans with interest rate swaps?

We are a borrower with a construction loan that is pay floating. At the inception of the loan, we entered into a pay-fixed/receive-floating interest rate swap with a growing notional profile that ...
0
votes
1answer
593 views

Stub rate and first fixing in IRS

I have 2 questions that probably are related. Suppose there is an IRS that pays a 2% fixed rate every 6 months and receives the Libor 3 months (but paid every 6 months). The swap starts today (March ...
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1answer
326 views

Does an Interest Rate Swap has a Vega component?

I am a bit confused on how you calculate vega for Interest Rate Swap. One argument is that IR Swap is a combination of fixed rate bond and floating rate bond. Since a bond has no vega component, IR ...
0
votes
1answer
307 views

Bootstrapping zero-rates from AUD swap rates

I have a pay fixed / receive floating interest-rate-swap on the AUD BBSY that I'd like to price for the purposes of accounting. I understand the general process to be as follows (assuming ...
2
votes
2answers
701 views

Curve Euribor - Euribor 3M

I'm setting up some Euribor 6M and Euribor 3M curves. So far i have all the data and quotes i need, but i'm having trouble defining the firsts points of the curve. I'm currently using 6M Euribor and ...
3
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2answers
342 views

IR Yield Curve and Fixing Dates

Consider two FRAs. 3x6 , Effective 3 months from now, terminates in 6 months. The floating leg payer pays 3-month LIBOR. Fixing date for LIBOR 40 business days. To price this at par, the fixed leg ...
2
votes
2answers
9k views

how to calculate a cross-currency swap in basis pt?

This question has been bugging me for awhile now and I've been trying to find a definite answer, however, no avail... My question, in specific, relates to the USD/CNH CCS rate. From what I understand ...
2
votes
1answer
271 views

Basic question on LIBOR-OIS swap

I'm just starting a pricing class and am a little confused by a statement in a class reading (a fed report). It goes something like this: "A bank borrowing at the 3-month LIBOR rate of 2.10 percent ...
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2answers
18k views

What is the Swap Curve?

What is the so-called Swap Curve, and how does it relate to the Zero Curve (or spot yield curve)? Does it only refer to a curve of swap rates versus maturities found in the market? Or is it a swap ...
2
votes
1answer
797 views

Pricing an interest rate swap using Eurodollar futures

I see this posted but no answer given. I think it would be a good idea if we have a question on here to illustrate an example of how to price an interest rate swap. So far, I understand that that for ...
2
votes
1answer
484 views

Why are multiple custom curves (swap) built for one desk?

Currently in a journey of learning and getting my hands a bit dirty with Interest Rate Swaps. Why there are multiple customized curves built by many even within one desk? For e.g. Short Rates desk ...