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7
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3answers
6k views

Why would a 6M LIBOR rate be significantly above 3M LIBOR, ED futures and swap rates?

Just was just looking at the various interest rates and noticed this: ...
7
votes
3answers
2k views

Why banks borrow from each other

I was reading on the topic, and would like to be sure that my understanding is correct. For the benchmark I would consider American banking system as I've mostly used sources such as FRS and Federal ...
7
votes
0answers
215 views

For which instruments performs SABR/LMM better than LMM?

For which class of instruments the SABR/LIBOR Market Model does perform better than the classical LIBOR Market Model? The LIBOR Market Model The LIBOR Market Model — also known as Brace, Gatarek, ...
6
votes
1answer
1k views

Where do swap rates and/or long-term forward rates come from?

I apologize if this is supposed to be obvious, but ... . Libor spot rates are quoted up to a year, beyond that one can use Eurodollar futures to continue to build the curve. Let's say up to 3 years. ...
6
votes
2answers
212 views

Why is the LIBOR-market model free of arbitrage?

Recently I have been reading a lot on the market models. One thing that keeps escaping me - why is the Libor-market model (LMM) assumed to e free of aritrage in continuous time ? To me this means ...
6
votes
1answer
336 views

Do you have a validation set for Libor Market Model implementation?

I'm trying to calibrate a Libor Market Model (LMM) in Matlab with my user-defined function, not their package. I already fitted the market volatilities using SABR but failed to simulate the ...
5
votes
1answer
150 views

Seeming arbitrage in excess reserves

In the US banks are required to store 10% of their deposits in cash in the form of Fed Funds. Due to misbalance of demand and supply, some banks borrow such cash from others; the volume averaged ...
4
votes
2answers
426 views

Why is USD LIBOR used for USD denominated securities?

I am just starting on Interest Rate Swaps & curve construction. While reading few materials on Interest Rate Swap, it's indicated for e.g. "Floating Coupon Index: 6 month USD LIBOR". LIBOR is ...
4
votes
1answer
59 views

Annualised Sharpe Ratio for Index vs Index Benchmarking

I am currently writing a paper about the performance characteristics of alternative energy equity indexes and am therefore comparing them to their benchmark indexes (msci world, etc). To calculate the ...
3
votes
3answers
7k views

Is there an Australian Interbank Rate?

Most widely used Interbank Rates are LIBOR, EURIBOR. Then I read online on SIBOR (Singapore). It says Canda, US are following LIBOR as well. So for Australia, is there a dedicated interbank rate like ...
3
votes
2answers
324 views

Basic LIBOR curve question

I'm new to the quant finance and have a very basic question about LIBOR curve. LIBOR is published every day for 4 different tenors (1M, 3M, 6M, 1Y), and each rate means how much annual interest ...
3
votes
2answers
289 views

Libor Market Model: numeraire change

I am currently studying the Libor forward market model, and although I get the mechanics behind the main arguments, I still do not have an intuitive idea of what's exactly the objective behind ...
3
votes
1answer
103 views

LIBOR with different tenor

Let $F(t;S,T)$ be the forward rate from $S$ to $T$ seen at time $t$, and $I$ be one of tenors, i.e. $I$ is one of {1M, 3M, 6M, 12M}. Then the forward curve $t\mapsto F(0;t,t+I)$ is $I$-forward curve. ...
2
votes
1answer
184 views

Is this an inconsistency between Swap and LIBOR?

I'm a little confused by what I see as an inconsistency between quoted £ swap rates and £ LIBOR. From the FT on 25/4/14: 1-year Swap (semi-annual): Bid - $0.63\%$; Ask - $0.66\%$ LIBOR: 6-month - $R_{...
2
votes
2answers
71 views

Does LIBOR in USD reflect short term interest rates in the U.S.?

The London Interbank Offered Rate (LIBOR) is an indicative average interest rate at which a selection of banks (the panel banks) are prepared to lend one another unsecured funds on the London money ...
2
votes
1answer
164 views

Spread over LIBOR on a Equity Swap

Does anyone how banks determine the spread over LIBOR on a Equity Swap? Example: Party A pays the return on SPTR to Party B Party B pays 1M LIBOR + 40 bps to Party A Does anyone know how the 40 ...
2
votes
1answer
586 views

Forecast 3m LIBOR USD. Budget purpose

How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years? I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
2
votes
0answers
289 views

what is the definition of resetting tenor and time to maturity tenor in libor rates

I have a question about the definition and understanding of libor rates. We have the time to maturity tenor, $T$, which is the time over which i borrow or lend money. For libor we also have the reset ...
2
votes
0answers
301 views

Bond (yield curve) dynamics in the Forward-LIBOR-market-model

The standard Libor-Forward-Market-Models provides a way of modelling the evolution of forward rates in time. However the model does not seem to be well suited for the modelling of zero-bonds. But ...
1
vote
1answer
1k views

LIBOR Rates available in CSV, XML etc

Is there a website that offers current LIBOR rates for all tenors for free in machine readable formats?
1
vote
1answer
684 views

Libor OIS basis swap equation

I'm a little embarrassed about this because I have a PhD in math, but I'm having a little trouble working out how to bootstrap an OIS curve from libor rates and basis swap rates. If I had an equation ...
1
vote
1answer
417 views

forward vs spot simply-compounded spot interest rate

Question about forward vs spot simply-compounded spot interest rate.Some definitions $P(a,b)$ a zero coupond price at time $a$ and maturity $b$ $L(a,b)$ simply compounded spot interest rate set at ...
1
vote
1answer
540 views

Automatic fixing of missing floating rate in QuantLib's addFixing()

Due to the periodic fixing of floating rate bonds's coupon rates, in order to calculate the bond clean price one must tell the pricing engine to account for previous LIBOR rate fixing. If I am right (...
1
vote
1answer
32 views

LIBOR Quoting Conventions

I have been trying to build a NSS parameterization of LIBOR term structure, and have confused myself over how all the dates are dealt with. On https://www.theice.com/publicdocs/futures/...
1
vote
0answers
30 views

Constructing Swap Curve from LIBOR

Say I'm considering a long maturity fixed rate swap, for instance 20 years paid semi annually. Now I want to find the fixed rate for this hypothetical swap. I understand that this fixed rate is going ...
1
vote
0answers
48 views

Exploding Libor Rates in Libor Market Model

I have implemented the Libor Market Model in Matlab. When I generate a number of paths, I notice that some of them explode. Does anybody have an idea what could cause this? I already tried solving ...
1
vote
1answer
100 views

LIBOR 3M and 1M from Vasicek model

I would like to discuss my approach toward modelling of interest rates with respect to its downsides and advantages. My problem is to forecast daily LIBOR 3M and LIBOR 1M over a particular time ...
0
votes
1answer
55 views

AUD Swap Reference Rate?

So I understand that BBSW is the reference rate used in AUD swap transactions since AUD LIBOR has been discontinued. If I want to build a curve out of the reference rates used to price AUD swaps, I ...
0
votes
1answer
683 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 ...
0
votes
1answer
25 views

Show that being Long a caplet & short floorlet (both with strike price K) is equivalent to a FRA where you pay the fixed rate K

How do you show that being long a caplet and short a floorlet (both with strike K) is equivalent to a Forward Rate Agreement where you pay the fixed rate K?
0
votes
1answer
914 views

What is the difference between BBSW and AUD LIBOR?

I understand that BBSW is the reference rate for financial instruments while AUD LIBOR is the interbank rate benchmark. However, since AUD LIBOR has been discontinued due to the rigging scandal, can ...
0
votes
1answer
75 views

LIBOR rates from Vasicek/Hull-White model?

I am somehow puzzled by the following problem: LIBOR rates are forward rates for an interbank loan for 1M or 3M (let's limit the range of possibilities to these two cases). Assuming that I have ...
0
votes
0answers
25 views

Range accruals - distribution of $n/m$

Say we are pricing a range accrual that pays $4\% * n/m$, where $n =$ # days in the period where libor $>3\%$, and $m =$ total # days in the period. Assume that we have a flat forward curve at $3\%$...
0
votes
0answers
39 views

The calculation of NIBID rate from 2013 by using NIBOR rate (UIP)

I need to calculate the NIBID rates from 2013. I have the NIBOR as a starting point and some indications but I am still quite confused. I found some advices online, but it does not seem to get me the ...
0
votes
1answer
42 views

Test Log-Normality for LIBOR forward rates under the Libor Market Model

As far as I understand, under the Libor Market Model the forward rates are assumed to have a log-normal distribution. Given that I have constructed my LMM model and now have a matrix of: k different ...
0
votes
0answers
40 views

How to prove following order?

Consider a consol bond, i.e. a bond which will forever pay one unit of cash at $t = 1, 2, . . ..$ Suppose that the market yield $ y$ is constant for all maturities. (a) Compute the price, at $t = 0$, ...