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fixedLegBPS is the basis-point sensitivity of the fixed leg, that is, how much its NPV changes when the fixed rate changes by one basis point: it's calculated as the NPV corresponding to a fixed rate of 1 bps. Since the NPV of the fixed leg is linearly proportional to the fixed rate, you can write the equation targetNPV : fixedRate = BPS : 1 basis point ...


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it seems the method fixedLegBPS() returns the sum of the discount factors associated to the fixed leg multiplied by 1 basisPoint. So what SwapRateHelper::impliedQuote() returns is actually the new fair rate of the swap to be used in the minimization algorithm. I have tried to find the implementation of the calculate() method from class VanillaSwap::engine ...


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In general, practitioners may run a combined book of Bonds and Interest Rate derivatives (Libor IRS, OIS etc.) In this case, in order to have an understanding of risk which includes all parts of the book in a systematic way, it makes sense to link the price of bonds to the LIBOR/OIS curves which underlie the valuation of interest rate derivatives. Also ...


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If you're lucky enough that the payment schedules (start/end dates, frequency, day count, business day adjustment etc.) are the same between the fixed leg of the interest rate swap and the "spread" leg of the basis swap, then you can simply use: OIS rate (%) = IRS Rate (%) - 0.01 * (basis spread (bps)) Otherwise, to do it accurately, you'll need to do a ...


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you have a missing element in your data - you need to take into account xccy basis. when you do so, then you would get the same valuation in both methods. the key is to remember that since your payoff of 100JPY is collateralised in usd, it effectively needs to be thought of as if your payoff is cash settled in usd.



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