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I'm trying to replicate price I get for CCIRS in SWPM. This is USD3m float vs RUB 1Y. Second leg doesn't matter for my question.

Suppose today is 7th of Jan 2019, deal date. Settlement will happen on 9th of Jan 2019.

I look at cash flow screen. Fixing is 2.80388. The first USD Libor 3m payment will happen in 92 days from now (31+28+31). And I see that it is 90/360*2.80388=0.006992053338 (on the screen this figure you can find if divide payment 1042.06 by notional 148659.09). Also I see that it is discounted with discount 0.993039, which is zero rate (equal to fixing) * 90: 0.993039 = 1/(1+0.0280388 * 90/360). enter image description here enter image description here

Could you please explain,

  1. why do they apply 90 days discount factor for payment which happen in 92 days?
  2. why do they use libor 3m to calculate this discount if actually this is forward F(2, 92) (here I rely on answer by Helin on quant.stackexchange), but not spot F(0, 92) ?

I'm asking here because I was not able to get response from help desk.

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The swap convention is that on swap start, the swap has 0 value. In your example, you entered into a swap to start in two days. The convention for Libor is that the fix applies from settlement date for the tenor of rate, calculated on an Act/360 basis. From the start of the swap, 1/9/19, to the first payment date of 4/9/19, there is exactly 90 days hence using the 3M Libor fix of 2.80388 multiplied by Act/360 (90/360).

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  • $\begingroup$ Thank you. From your answer and from bloomberg docs it follows that I valued the contract on 9th of Jan: (swpm help) The Valuation date is the date at which future cash flows are discounted. I missed it. Then it is clear. But why is the default setup of SWPM screen is curve day = today, valuation date = today +2? Valuation date should be also = today. Because today I'm interested in today price. Even more, if I set valuation = today, first cash flow will be 2 days cash flow from 7th to 9 and then 90 days cash flow from 9 jan to 9 mar. $\endgroup$ – Sasha M. Jan 17 at 13:18

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