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 weight to assign to it in order to calculate the aggregated VaR of the portfolio. I have calculated every other asset's weight as the total value of the position relative to the total value of the portfolio, however since the NPV of the Swap is exactly 0, I cannot apply this approach. I have tried, and I think is the correct way, using the DV01 of the swap to calculate something as its total exposure, but everything I have tried gives results that are completely unreasonable. Could anybody give me some idea on how to weight this swap in the portfolio?
Similar to dm63's answer: if you are the fixed payer in the swap:
- add a long fixed rate bond with coupon equal to the fixed rate and notional equal to the notional of the swap.
- add a short Floater with the coupons linked to the floating rate of the swap. The notional is the same as of the fixed rate bond.
DV01, duration, risk should all be well captures doing this.