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1answer
43 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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2answers
220 views

Why QuantLib computes the fixed-leg swap rate by this formula?

I'm trying to understand how QuantLib creates (bootstraps) a yield curve from a vanilla swap at the source level. I have the following test code: ...
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1answer
594 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 ...
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1answer
59 views

Why is the discount function non increasing if pure cash holdings are feasible?

I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ...
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1answer
144 views

Swap Rate vs Par Rate

If we calculate the par rate for n periods, why does the nth swap rate equal the par rate? A mathematical formulation would be helpful apart from an intuitive answer. Edit: Example:- A 2 year ...
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1answer
71 views

Variance Swap volatility

In an article, it is mentioned that a parameter is "the variance swap volatility at time t". I know what a variance swap is but I don't know what they could mean by "variance swap volatility". ...
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1answer
60 views

Why might a manager consider using an interest-rate in which the notional principal amount declines over time?

Say swap would be used to convert the payments of its portfolio of fixed-rate residential mortgage loans into a floating payment. Why might a manager consider using an interest-rate in which the ...
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2answers
519 views

What is the instantaneous P&L of a Variance Swap?

What is the instantaneous P&L of a variance swap. Is it $(\sigma^{2}_{t}-\sigma^{2}_{implied})dt$?
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2answers
40 views

Swap prices (preferably based on 3 month LIBOR)?

Where can I find a listing of forward swap rates based on libor. E.g. pricing on a swap of rates floating over 30 day libor for 3 year fixed, one year from now?
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1answer
73 views

Static and Dynamic Hedging of Vol/Var Swaps

Why can a variance swap be perfectly statically hedged whereas a volatility swap requires dynamic hedging? Possible reference request to the corresponding literature.
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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?
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1answer
297 views

What is a Basis Swap Curve?

I know what a Swap Curve is. But I don't understand what a Basis Swap Curve is and how it is constructed? Need some guidance on this.
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2answers
135 views

OIS & LIBOR swap

Why do people use OIS and LIBOR swap spread to compare/value bonds/derivatives? Why not just use US treasury?
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1answer
380 views

negative discount and zero rate on swap bootstraping

Hi I am writing a program to Bootstrap a EURO zero swap-curve for tenor 3M and 6M with given bid and ask. When I run the program , I get a negative zero rate and discount factor from 5Y till 30Y for ...
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2answers
91 views

How to calculate cash flow for XC swap

Given 3MLibor vs 12MLibor USD basis swap the 3M Libor is exchanged at 12MLibor+1%. How to calculate the cash flow
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1answer
214 views

Girsanov theorem in CMS convexity derivation

I am going through the derivation of CMS convexity from the notes of Lesniewski There is a transformation from $T_p$ forward measure to annuity measure $Q$ as $$ ...
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3answers
76 views

Who is the issuer and the counter part of this instrument?

I have the following SWAP contract : T1UH4 which is a 2-Year Deliverable Interest Rate Swap. Product info : ...
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1answer
88 views

Can you hedge a derivative with a CASH|spot product or does it have to be another derivative instrument

Consider you have a SWAP (any kind) to hedge this SWAP, you will most likely use another Derivative,but can you use a cash|spot product to hedge this. Like Cash Equity or FX Spot
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1answer
480 views

Convexity adjustment

I have a problem with the underlying assumption in the future/forward convexity adjustment. If I understand correctly, the assumption is, if I am long ED, I earn money when rates go down and invest ...
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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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1answer
53 views

Pricing a Vanilla swap between coupons; What rates to use?

Vanilla Swap question. Entered into a 5Y fixed for floating HUF swap. Fixed is annual coupons, Float is semi-annual coupons. 1 month later I want to price it. I set up my future values for Fixed ...
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0answers
67 views

CVA for an inflation linked swap

I am trying to value an inflation linked swap and wish to calculate the associated CVA and DVA. I think the best way to approach this would be via a simulation. Suppose I wish to calculate CVA over ...
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0answers
33 views

Using Forward Equity Returns to Value Stream of Equity Return Cash Flows

Can I value the equity leg of an equity swap using the projected forward equity returns? In other words, for a sequence of times $t_{0}<t_{1}<\ldots<t_{n}$, where $t_{0}$ begins a brand new ...
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0answers
67 views

Cross-Currency Inflation-Linked Swap

I am trying to find any references to cross-currency inflation-linked swaps. Have anyone encountered them and can describe how they work and how they differ from standard year on year inflation swaps? ...
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1answer
1k views

Hedging a Long Equity Swap by Shorting the Stock

Suppose that I enter an Equity Swap, such that I pay a floating rate and I receive the equity return. The payment is every one year for both the rate and the return, and the swap expires in one year. ...
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0answers
295 views

How to calculate a the PFE for a Swaption?

How do you calculate the Potential Future Exposure (PFE) for a swaption? Do you incorporate the dynamics of implied volatility when you are running your simulations? Is there a standard way to ...
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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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1answer
128 views

Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
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2answers
37 views

Does a 1Y swap depend on zero curve beyond the 1Y point?

When using market swap rates to calibrate a discount curve, it seems that the PV of a 1Y swap depends on the zero curve at points beyond the 1Y mark. For example, a USD 1Y swap with trade date today ...
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2answers
71 views

What is a Constant Maturity Swap (CMS) rate?

I have been searching in books and on the internet for a basic definition and explanation of CMS rates, but I cannot find anything clear and simple. Can you explain (maybe with an example) what a CMS ...
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1answer
603 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
90 views

How to work out the forward outright price from the bid/ask quotes?

I'm facing this problem: Spot AUD/USD is quoted at 0.7634/39; six-months swaps are 112.1/111.1; at what forward outright rate can a price taker sell USD value spot/6 months? On the spot ...
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1answer
34 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 ...
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1answer
41 views

Swaption on a swap with 0 year tenor

Any ideas on valuation of IRS swaption on a swap with 0 year tenor? As an example, we have a 5 year swaption, on expiration it is cash settled; the underlying swap tenor is 0 years with excercise and ...
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1answer
131 views

How can we write swap as a chain of FRA's

For the rest of my question I use the notation from Brigo. The discounted payoff of a receiver interest rate swap (RFS) at $t<T_{\alpha}$, where $T_{\alpha}$ is the first resetting date, is given ...
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2answers
434 views

Matlab; How to specify Coupon frequency for Interest Rate Swap

I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using ...
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0answers
15 views

Estimate the risk of swaptions

I would like to model OTM Swaptions. I can use some implementation of the Bachelier model (not B76 due to negative rates) and implied volatilities from Bloomberg. For 10Y X 10Y (10 years option ...
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1answer
24 views

Factor sensitivities for EURUSD swap

Trying to understand various risk factors for a EURUSD swap. While I understand why a EURUSD swap would have USD LIBOR, EURIBOR, EURUSD currency as risk factors, why is it that it would also have EUR ...
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0answers
19 views

Validation of an outright bid/ask computation

Given that the spot USD/CAD (for example) is $1.6120/25$ and six month forward swaps are $27/26$. What would the outright price be? I notice that bid of swap is larger than ask, that implies that is ...
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0answers
29 views

Hull white tree and the pricing of an interest rate swap

Currently, I have been able to set up the hull white tree. To price the swap, and we use the formula from Wilmott "Introduces Quantitative Finance", where we use the discount factors for all ...
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1answer
26 views

Deltas and CC Basis Swaps

How do I calculate the dollar impact of basis change for a portfolio of cross currency basis swaps which hedged loans/bonds? I am thinking it might have something to do with delta and tenors but I ...
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0answers
27 views

Inflation Vs OIS Swap

Has anyone worked on a swap with one leg as Inflation (CPI/IPCA) and other as OIS (BRL-CDI) ? I'm looking for the terms / sample confirm how that will look like. Thanks in advance!
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0answers
57 views

Modelling prepaid commodity swaps

I'm somewhat new to derivatives, so please forgive a potentially silly q: Suppose there is a VPP agreement (volumetric production payment) which is basically a prepaid commodity swap. The financier ...
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0answers
20 views

How would MTM an interest only currency swap affect its valuation?

Not sure how a central clearing house that marks an interest only currency swap between two parties to market everyday would effect the currency swap's price. Any ideas?
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0answers
12 views

Modified average swap

I have an instrument that is a swap over the SMK6 that at expiry (it has only one cashflow) pays the difference between the average daily Price of the underlying and the actual Price. The average ...
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0answers
52 views

What interest rate dynamics would you suggest to simulate a single swap?

I need to calculate the Potential Future Exposure (PFE) for a single swap (not a portfolio). As far as I know, a stochastic model is needed to simulate the interest rate curves (from here). Could ...
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0answers
61 views

swaps valuation

I am asked to solve the marking to market value(MtM) of a swap, unfortunely i´m having big troubles finding the solution, it´s a 5.5% (vs. LIBOR) 10-year swap, The notional is 500 mio USD and LIBOR ...
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0answers
426 views

How to calculate cf and interest accruals of the swap?

How to calculate to calculate daily interest accruals and cashflows for the full term of the swap, given notional, effective date, maturity date: (total one year), accrual: ACT/360 payment: ...