Tagged Questions
4
votes
4answers
240 views
how to derive yield curve from interest rate swap?
According to some textbooks, to derive the yield curve, quote
overnight to 1 week: rates from interbank money market deposit,
1 month to 1 year: LIBOR;
1 year to 7 years: Interest Rate Swap;
7 ...
2
votes
2answers
93 views
Fair swap rate of an amortizing swap
Recently I came across the problem of amortizing swaps. This is an agreement, where fixed payments and floating payments (e.g. 3-months LIBOR + spread) are exchanged based on a notional that is ...
1
vote
3answers
170 views
How to hedge the fixed leg of a swap contract?
I happened to get this question for Fixed Income Swap contract. (let's assume it's it's not cross currency).
If the fixed leg is paying 10% interest rate in this contract, but in the market the ...
3
votes
2answers
158 views
Is it true that pricing an IR swap doesn't require any stochastic model but calculation of the PFE of an IR swap would?
Pricing an IR swap doesn't require any stochastic model but calculation of the PFE for an IR swap would require the Hull White Model or any other stochastic short rate or forward rate model.
Is ...
7
votes
1answer
1k views
What is the reason for the convexity adjustment when pricing a constant maturity swap (CMS)?
I'm trying to wrap my head around pricing a Constant Maturity Swap (CMS). Let's imagine the following deal: 6m LIBOR in one direction, 10y swap rate in the other. The discount curve is derived from ...
6
votes
1answer
232 views
How to build the short end of a zero coupon curve for non-core Eurozone countries?
I am in the process of building zero coupon curves for some countries in the Eurozone.
I have the following data sets:
Euribor and EONIA
Swap rates
Bond price and yields
The bond prices (and thus ...
4
votes
1answer
276 views
Is there any gamma in basis (i.e., floating for floating) interest rates swaps?
It is well known that vanilla fixed for floating swaps usually have a bit of gamma, but does a floating for floating (basis) swap have any? For the sake of simplicity, let's assume that both legs of ...
