I hope you can help me.
So let say we have an interest rate swap, with the following characteristic:
Start in 30/06/2015. End in 02/07/2019
It has fixed payment every year, and floating every half year.
The floating leg = From Hull (2012) the floating leg is just set equal to the notional, if we just have had a payment.
However, the fixed leg: Due to weekends, in ex. year 3, the fixed payment will be done 02/07/2018.
Fixed leg have day count convention: 30/360.
So basically, do we change the discount factor and the payment because of the extra 2 days?
Instead of year 3, we will have year 3.005 to discount the cash flow. (using the convention actual/365 -> have read this was normal)
and do we change the payment as well? Can we get 1.005 * Notional * Swap rate. (30/360) -> again we are two days late?
One more question: I am currently using the Vasicek model to find the discount factors. But I have read, that some uses the LIBOR rate instead?
Do you have any experience regarding this ??