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Let's say the valuation date is 08/24/2023. The effective date and maturity date of the swap are 03/12/2022 and 01/10/2024. I want to apply the given historical fixing rates till the valuation date and thereafter apply the forwards from the valuation date till maturity using discount factor data. I want to compute the forward rate as of the valuation date. How can I achieve this without altering the given discount factor data?

Given discount factor data is

CurveDate   Curve   MaturityDate    Df
08/24/2023  DKK 08/24/2023  1
08/24/2023  DKK 08/25/2023  0.9994925
08/24/2023  DKK 08/26/2023  0.998985
08/24/2023  DKK 08/27/2023  0.998478

Given Fixing data as

Fixingdate  Fixingdate
3/11/2022   11.65
3/12/2022   13.65
 ------- so on
08/23/2023  17.45
08/24/2023  16.35
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  • $\begingroup$ Related: quant.stackexchange.com/questions/39191 $\endgroup$ Commented Jan 4 at 20:49
  • $\begingroup$ @DimitriVulis Yes I saw the post but how to get the forward rate using a hybrid approach using a fixing rate and the forward rate using discount factors? $\endgroup$
    – John83
    Commented Jan 5 at 3:22
  • $\begingroup$ Hi, did I interpreted your question correctly? Are you looking to use historical fixings and the corresponding discounting curve to value an interest rate swap? $\endgroup$
    – Xiarpedia
    Commented Jan 5 at 11:52
  • $\begingroup$ @Xiarpedia No. As you see in the post, Fixing rates are available before the valuation date, and the discount factor is available after the valuation date. So to get the forward rate, we can use the Fixing rate as is values, and after the valuation date, we can construct a forward curve. By combining, we can generate the Forward rate as of the valuation date. $\endgroup$
    – John83
    Commented Jan 5 at 16:26

1 Answer 1

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I think the problem you are trying to solve is that valuation date falls in the middle of a swap period and for that period you want fixing to be used while for all subsequent periods you want projected rates to be used. In QuantLib you achieve that by calling addFixing() method on the index that you are supplying when you construct the swap. Then the discounting engine will look up interest rates from the fixings if it needs rates before the evaluation date.

Note that if your swap is not IBOR based but is compounded OIS, then within the compounding formula itself some rates should be taken off fixings and some off the curve, and that is not yet implemented in QuantLib (although is on roadmap) so these partially fixed periods will look like fully fixed instead based on the ON rate at the beginning of the relevant period.

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