When working with interest rate swaps (I'm building a calculation spreadsheet), how many decimal places should be used for displaying and working with LIBOR rates, swap rates and discount factors?

My initial thoughts are:

  • IBOR Rates - 5 decimal places, e.g. 4.25000%
  • Swap Rates - 3 decimal places, e.g. 4.611%
  • Discount Factors - 4 decimal places, e.g. 0.9804

Most online tutorials that I see work with IBOR rates to 2 dp, but the official rates are released to 5 dp.

  • 1
    $\begingroup$ Could you elaborate on what you mean by swap / IBOR? Like OIS and IBOR? Re the discount factor: You will scale that by cash flows / notional value, e.g. 10 *1E6. Thus, if you consider only 4 significant digits, you’ll have a valuation mismatch in the order of 1E2 in that case. This, Usually, you want higher accuracy in your discount factors (i.e. 10 places or more) $\endgroup$ – Kermittfrog Apr 21 '20 at 20:16

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