Questions tagged [interest-rate-swap]
An interest rate swap is a financial derivative where two parties exchange interest payments on a specified notional principal over a set period. One party pays a fixed rate, while the other pays a floating rate tied to a reference rate (e.g., LIBOR). These swaps help manage interest rate risk, hedge against rate fluctuations, and enable speculation on future rate changes.
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Swap IRS - SOFR lookback
I have a fixed-float swap valuation to realize. The floating leg is referenced to SOFR with a 10 days lookback. The first coupon has already started, on 01/09/2023, and ends on 01/12/2023. The first ...
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Can PCA be used to transform a ladder of interest rate risk?
The context
For traders/market makers on interest rate swaps desks, it is essential to have a model that transforms risk from its most complex representation (i.e. a ladder of every tenor) into a less ...
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swap carry/rolldown mid-period
Pretty much all discussions and examples I have seen discussing carry and roll down for fix-flt interest rate swaps are ones where the forward date coincides with the coupon dates on both legs.
It ...
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Convexity Adjustment for Average Rate IRS
Suppose that one want to price an Interest Rate Swap with daily averaging, i.e. the floating leg looks like
$$Floating~Leg = \sum\limits_{i=1}^N P(T_i)\cdot\frac{\sum_{k=1}^m F(t_k, t_k+\delta)}{m}, ~...
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Carry for an Interest Rate Swap
I don't get why for calculating the carry of a spot starting swap I need to adjust the difference between the fixed rate and fixing by the Dv01?
For example if I receive in a 5y swap and want to ...
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Pillar Date of Overnight Interest Swap Helper
I am not being able to set the pillar date of an overnight interest swap helper to its maturity date.
I have the following code:
...
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Should I use the yield curve or swap curve to find the value of my swap? [closed]
The PiVe Capital Swap Spread Trades' case study (in Fixed Income Securities from Pietro Veronesi) suggested that in pricing a swap, using a swap curve appears to be the most reasonable methodology.
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Relation (approximate??) between Swap rate and Cap strike
I just have come across some relation between Interest rate swap and strike of Cap as below
$K_{Cap Strike} = \frac{1}{1 + r \...
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Duration of interest rate swap - seek explanation from a previous post
I have come across a Q&A about the calculation of the duration of an interest rate swap on this site.
In the Q&A, the derivative is calculated as:
$\frac{\partial PV}{\partial r}=t_nD(t_n)+q\...
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Par par asset swap counterparties in practice
In practice is it possible to enter into a par par asset swap where the bond is purchased from counterparty A and the swap element is conducted with counterparty B?
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What is the scope of spot lags and spot dates?
In the context of interest rate derivatives, we often speak of the spot date. But of course, there is not a "the" spot date, because there are multiple spot dates, for example for different ...
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Calculating the volatility of an interest rate swap
At its most basic the volatility of an instrument is the standard deviation of its return series over time calculated as percentage change of the price series.
How would this work for interest rate ...
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Higher coupon on interest rate swap has higher DV01
Why the higher the fixed rate of a swap is, the higher the DV01 will be?
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Replicating QuantLib plain vanilla Interest Rate Swap valuation
I'm learning QuantLib-Python and trying to replicate an Interest Rate Swap valuation on a custom curve constructed by passing lists of dates and discounting factors. Please see my code below
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PTP 10% Withholding [closed]
Apparently there's a new IRS rule that can be summarized as "starting January 1st, 2023, investors who are not U.S. taxpayers must withhold 10% of proceeds from the sale of PTPs (Publicly Traded ...
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Quantlib Slow valuation of ois_swap on multiple eval days
I have bootstrapped a curve using several depo and swap rates and am trying to use that curve to get the NPV of a swap over a period of time. The generation of prices iteratively through time is ...
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MtM of interest rate swap if forward rates are realised
It might be a very simple question but for some reason I’m a bit confused.
Let’s say we enter a long SOFR vs fix interest swap at par. Say 5 year swap with annual coupons (the rfr is daily compounded ...
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IRS Payer/Receiver swap dv01
I was just wondering whether it was possible for long payer swaps to have a negative dv01 and vice versa for a short payer to have a positive dv01? Intuitively by definition of payers and receivers I ...
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Total Return Swap (TRS) on Convertible Bond
Is there any relevant paper/source I can look at for pricing TRS on convertible bond? Specially, how should I evaluate the asset return leg? Let's say I already have an convertible bond pricer that ...
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How to read the notation used for the swap rates in the form 4.412/452 for the 1 year swap rate?
How to read the notation used for the swap rates in Table 20.6 below?
What does 2.412/452 means?
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Improving Fixed-Fixed Cross-Currency Swap Pricing in Python with Limited Data and Quantlib
I am working on creating a fixed-fixed cross-currency swap pricer in Python for EUR-USD and GBP-USD pairs. Here's my current approach:
Bootstrap a GBP SONIA curve.
Bootstrap a SOFR curve.
Obtain the ...
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Most relevant papers on IR / discount rate(s) modelling in the last 5 years
As the question states, what are some relevant recent papers I, as a non-expert, should read on IR modelling, products, and mechanics (that do not involve AI/ML)?
I think my knowledge on this topic ...
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how is accrual calculated on the floating leg of a OIS swap
for Libor swaps, the accrual for the floating leg is easy as the cashflow is known already at accrual start day. The calculation would be similar to how the accrual of a bond is calculated.
How about ...
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what is the problem of using asset swap spread to compare bonds
people use asset swap spread to compare bond relative values (rich/cheap).
is there a known issues or anything that needs to be aware of when using swap spread to compare relative value of bonds?
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Find the spread of an Asset Swap Spread
An Asset Swap Spread contract exchanges the annual defaultable coupons computed on the defaultable term structure $SPS^1$:
$$
SPS^1 = {i^1(0,1) = 0.025; i^1(0,2) = 0.03; i^1(0,3)=0.018}
$$
versus s ...
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Understanding how markets predict BoC's policy interest rate decisions
I read in the newspaper things like,
Interest rate swaps, which are based on market expectations about future rate decisions, are pricing in at least one Bank of Canada rate cut later this year, and ...
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Quantlib: Problem with discount curve with different settlement days than the swap curve
When pricing a interest rate swap, I use the swap curve to price the instrument and the corresponding OIS curve to discount it. However, for some countries (eg Canada), the IRS curve settles on the ...
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P&L explain for swap?
I try to make a P&L explanation of a swap from the delta, gamma, to the N instruments of the rate curve (money market, futures and swap).
I use a perturbative shock of 1bp for each instrument of ...
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forward starting interest rate swap trade settlement date
Say today is 13rd Dec 2022,
For a spot staring swap, its settlement date would be 15th Dec 2022 assuming the settlment offset is 2 days.
What is the settlement date for a one year forward starting ...
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Simplified formula for duration of interest rate swap
Lets consider the simple interest rate swap instrument as 5-year maturity interest rate swap. I found an interesting simplification to calculate the duration of such swap as,
$\frac{\left(1 - e^{-r_t *...
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How to quickly calculate PV01? Or quickly calculate notional back given PV01 and duration?
is there a way to quickly calculate the PV01 of for example for a swap EUR fix floating 10 years?
And is it possible to calculate the Notional, with a given PV01 and the years of the trades or ...
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How OIS swap rates behave when we receive or pay OIS swap rates?
I am reading a news article regarding how OIS swap rates behave when we receive or pay OIS swap rates.
The article states that when we receive OIS swap rates it makes swap rates fall. When we pay swap ...
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Confusion about Initial Pricing IRS with Dual Curves
This is my first time delving into dual curves, or multiple yield curves. A question struck me about using OIS discounting when choosing the swap rate of a new IRS.
Without multiple yield curves I ...
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Par rate of Interest Rate Swap
I'm interested in deriving the par rate of an interest rate swap priced under the single curve framework. Let's follow the corresponding Wikipedia article for the sake of notation simplicity.
The ...
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Use of interest rate swaps in liability-driven investing
You probably have home across recent events in the UK bond markets. The Financial Times article "The reason the BoE is buying long gilts: an LDI blow-up" from Sep. 28, 2022 goes through why ...
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Optimize interest rate swap calculations in Monte Carlo Simulation
I’m running a simulation in which I want to calculate the NPV of 100 swaps over 1000 (or even much more) different interest rate curves.
It looks like Quantlib is not really fast in performing these ...
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Swaps: Why is this approximation of carry valid?
I decided to split the first part of my original question into this separate one as they are somewhat unrelated.
The definition of carry of a (spot) starting swap I know is $$\frac{S(0, T) - F(0,\tau)}...
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carry and roll of an asset swap [closed]
I came across many interesting questions regarding carry and roll of swaps, bond futures and bonds. Now I found that link about the carry / roll of an asset swap. Reading that article two questions ...
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BLOOMBERG Strike vs Straddle Volatility
In Bloomberg's VCUB, what is the difference between the "strike" volatility and changing this option to "straddle"? It seems like the "straddle" vol should be the same as ...
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Why is carry divided by DV01 to scale it?
If I understand correctly, 6M carry in a fixed-floating interest rate swap should be the difference between the fixed and floating leg.
When I read this on Page 2:
https://corporate.nordea.com/api/...
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Interest rate swap Profit and loss attribution
I am wondering how the IRS daily PnL will normally be attributed from trader's/market risk perspective.
Will it be broken down into three parts daily carry (Daily interest accrual), daily roll-down (...
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Approximate dollar MTM of interest rate swaps
I'm definitely a fixed income tourist but I'm wondering if there's an easy way to back of the envelope approximate dollar PnL of an interest rate swap
For example, if I enter a $1m fixed 5y USD swap ...
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ATM interest rate swap dv01 vs off-market swap dv01
How significant is impact on dv01 of an at-the-money swap if rates move significantly?
For example: lets say a 5Y USD at the money swap has 4.6 duration. now, if the rate curve move by 150-200bps, ...
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How to calculate the gaussian VaR for a portfolio with 3 corporate bonds and 1 IRS payer?
As data I have the daily change of zero coupon spot rates for some vertex (0.25, 0.5, 1, 2..) and the daily change of z-spread for corporate bonds, also by vertex
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Returns of an interest rate swap
I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate ...
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How to get forward rate fixing when valuating a swap
Suppose I want to value a (fwd) starting swap, that means I would like to calculate the fixed rate $S_{\alpha, \beta}(t)$. Note, I'm using Brigo's Notation here. We know that the discounted payoff of ...
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Fixed vs float swap interest rate risk
I have some technical questions about what are the best settings in Bloomberg to calculate the interest rate risk of a swap.
When Bloomberg calculates the DV01, it simply bumps the par swap curve by +/...
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Term SOFR rate formula
The following website gives the specifications of the CME Term SOFR reference rates: CME Term SOFR.
Point 1 in the link above specifies that the tenors that are currently supported are 1m, 3m, 6m, and ...
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What is the Performance Total Return Swap (TRS)? How about Performance Fixed TRS and Performance Float TRS?
I just know these products recently: Performance Total Return Swap (TRS), Performance Fixed TRS and Performance Float TRS.
But cannot find a detailed explanation of the product, all I can find is an ...
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