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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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How swap curve construction & discounting work [closed]

I am a co-op on a swap desk looking to understand how the swap actually works, including discounting & risk. Per my understanding, the swap curve is built using a combination of curve instruments ...
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Where can I find implied rates for central bank decisions?

Sometimes I'll see sources online say things like markets are pricing in a certain amount of bps rate cuts/hikes by the Fed or ECB (or some other central bank) for a certain monetary policy meeting ...
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When to use SOFR strip VS Eris interest rate swap, what is the difference?

I am a beginner in financial risk management. learning this as a hobby. Please guide me here. Here we have 2 examples where one example uses ERIS swap futures and other uses SOFR strip to hedge. What ...
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STIR Topic: How to calculate implied policy rate for next meetings using FRA

Here a question about market implied rate using FRA: In some countries, like Poland, Hungary, Czech and South Africa, you have only FRA to find the zero rate for maturity less than 1 year. Here a ...
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Approximate 5y swap rate move in 1 tick move in 5y treasury

If CT5s (the current on the run 5y treasury) goes from 99-20 to 99-21 - what will be the approx rate move in the 5y swap rate. Just trying to ascertain rule of thumbs for 5y, 10y and 30y.
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PCA and OLS regression to transform to interest rate risk? [duplicate]

I’ve been working on different interest rate risk transformation methods for swaps and was interested in implementing PCA & OLS regression. I’m looking to bucket my exposure in all tenors to ...
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QuantLib: Problem with IRS valuation

I would like to value an IRS. My first problem is with "RuntimeError: more than one instrument with pillar". Theres is clearly no overlapping instruments. I can't get the valuation of the ...
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QuantLib: IRS valuation

I tried to value a simple IRS in QuantLib and failed. I have few questions, which will probably help to resolve these issues. Would be super grateful for answers in these matters. When I set up a ...
Antek's user avatar
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Do RFR swaps fix in advance or arrears?

Consider the floating leg of a IRS on the RFR which is effective today at $t_1$ and has a payment at $t_1 + 3M$. My question is, when the payment occurs at $t_1 + 3M$, is this the $3M$ forward rate ...
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Precisely how do you delta-hedge a spot-1Y SOFR IRS with SOFR futures?

I'm struggling to construct hedge ratios that delta-hedge a spot-1Y IRS. Say I'm roughly in the middle of an IMM period, date = Oct 30th 2023 and I trade a 1k dv01 spot-1Y SOFR swap. I'll need some ...
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Two types of hedge : impacts on position carry

Think of an IG bond purchase, financed at 3M Euribor, in an inverted curve environment. The yield on the bond, Y, is below the 3M Euribor, at purchase. The investor is looking to lock in a spread over ...
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SOFR Futures and impact on short-end dollar swaps and front-end notes

Suppose there is an exogenous event that triggers SOFR futures to be repriced lower. For simplicity, lets say the SOFR futures mostly impacted are whites/reds. Since USD swaps are priced off of the ...
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Interest rate swaps - if i expect rates to be cut later than market expectations, what swap can I put on?

If I think market expectations are too dovish and I expect rates to stay high for longer i.e. rate cuts by X central bank to happen in September for example (as opposed to whats priced in, e.g. May), ...
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Who exercises the termination in an early termination clause on a swap

If we have a 30y swap with 5y early termination breaks exercisable by either party, at each termination period, who would exercise the early termination/choose to break the swap? Is there an optimal ...
SwapNewbie's user avatar
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Convexity adjustment future/fra in practice

The topic of Future/FRA adjustment has already been addressed on a theoretical point view, roughly we need a rate model to calculate the covariance between the money market account of the discount ...
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Buying a delta hedged payer swaption

If I/Client buy a European payer swaption, I understand that I gives me the right to pay the fixed rate at the strike level at maturity and receive a floating rate with an IRS- I expect interest rates ...
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How do I calculate implied convexity from futures vs swaps?

From STIR Futures - Trading Euribor and Eurodollar futures by Stephen Aikin, convexity is determined by comparing the zero rate on a swap with an equivalent set of futures. For example, using futures,...
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Brazil IR swaps and help with new holiday

Brazil has a pending new holiday that is expected to be official in the next month, for date Nov 20. Existing BRL interest rate swaps contracts have a clause that fixed accruals are not impacted by ...
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Bloomberg Interest Rates Swaps Curve Fitting in the presence of Serial FRA

The documentation points to a different approach than the standard linear in log discount factors. The EURIBOR 6M curve 45 is the prime example. Does anyone understand the implementation details of ...
roi0113's user avatar
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US swap spreads

Traditionally US swap spreads were traded as LIBOR or OIS swaps versus USTs. In the former case the spread at the short end of the curve was very much a function of LIBOR repo spreads. Further, LIBOR ...
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Calculating key dates for a Forward Starting Interest Rate Swap versus a Spot IRS

How are the Effective Dates and Maturity Dates of a forward starting IRS (eg: EURIBOR3M 5Y5Y) handled when the forward starting term ends on a non-business day? And if that date is adjusted, how does ...
Simon Wiltshire's user avatar
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QuantLib: Latin American FixedFloat Swap pricing with multiple payment frequency specification

With reference to the post of latin american swap, I am valuing the FixedFloat CLP swap.The specifications of this swaps has payment frequency upto 18 months as Zero coupon(1T) and after that ...
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QuantLib: Pricing BRL zero coupon swap using relevant attributes in Quantlib

I am trying to price the BRL zero coupon swap. As we know that ZC swaps fixed payer pays a single payment at maturity and the float payer pays the interim payments till maturity. So in this case, ...
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Pricing of OIS on USD at t=0

I am tormented concerning the pricing of an OIS (USD). My concern is how do we find the rate of the fixed leg using Federal Funds rates, at t=0 since these are not known at that time. Thank you
EconFox's user avatar
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Find the right module for CDI DI BRL swaps valuation Quantlib

I'm trying to find a way to price BRL CDI Swaps with Quantlib but I can't find any solutions so far - so I was wondering if anyone encountered this issue: I don't see any solution on Quantlib. I ...
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Determining the floating rate for an interest rate swap

I'm trying to price an Euribor 6M Swap and comparing this to Bloomberg's swap manager. However, I'm having some doubts on my implementation of getting the reset rate for the floating leg. In Bloomberg ...
aghilario's user avatar
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Total return time series for an interest rate swap

Without paying for a bespoke dataset or tool, how can I go about creating a total return time series for irs eg for 10y sofr swap such that it includes spot price move + carry/roll? I’m doing this so ...
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Constructing the FedFunds Yield Curve with jumps at FOMC meetings

When constructing the FedFunds yield curve I want to define the curve based on two separate interpolation schemes. The first on the short end being LogLinear on the discount factors between FOMC ...
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Issues with bootstrapping to extract discount factors from swap curves

If I equalize the discount factor at the same point in time between a fixed-rate payer and a variable-rate payer, I will have the following problem when referencing the data above the swap curve. Let'...
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Pricing of a non-standard swap contract

Here I have a swap product, where a fixed and floating interest rate will be applied on notional amount. Fixed and floating legs involves 2 currencies, one of them is delivery currency (e.g. USD) and ...
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Deriving central bank hikes/cuts from a swap curve

Can you please explain the following? Please assume I am 5 years old. how do you derive the cuts/hikes of the policy rate priced in a swap curve? why you can derive the cuts/hikes only from a swap ...
Finance_student's user avatar
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3 answers
245 views

Bounds for Par vs Zero DV01

Let’s say I have a swap portfolio and a vector of Par sensitivities (DV01‘s) for N nodes of a curve. Let’s call the vector P = (P_1,…,P_N). To derive the sensitivities w.r.t zero rates, we could of ...
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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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2 votes
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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 ...
quanty's user avatar
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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 ...
Finance_student's user avatar
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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 \...
Brian Smith's user avatar
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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\...
augustine's user avatar
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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 ...
Tom Anderson's user avatar
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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?
Mini PP's user avatar
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2 answers
395 views

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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2 votes
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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 ...
Gabi's user avatar
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4 votes
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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 ...
StormsEdge's user avatar
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1 answer
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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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