Questions tagged [interest-rate-swap]
The interest-rate-swap tag has no usage guidance.
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1answer
57 views
Bloomberg SWPM: Day count to calculate discount factor for US0003M
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 ...
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0answers
99 views
An interview question: Swap rates
Calculate the missing par bid and ask swap rates for the following tenors and briefly describe the calculation (assume the simple zero rate is linear interpolated, short-end (<1 years) is simple ...
1
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1answer
121 views
Basic question on USD Interest Rate Swap
I am just starting out as a rates and derivatives trader.
Can someone please recommend some books for trading USD interest rate swaps (including risk management)?
Any additional guidance would be ...
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0answers
37 views
Swaption - underlying forward swap rate
I H. Corb's bookabout interest rate swaps and oder derivatives, the present value of an T into n payer swaption is given via
$A\sigma\sqrt{T}\left[\frac{1}{\sqrt{2\pi}}e^{-\frac{d^2}{2}}+d\,\mathcal{...
2
votes
1answer
48 views
Swaption annuity factor
In H. Corb's book about interest rate swaps and oder derivatives, the present value of an T into n payer swaption is given via
$A\sigma\sqrt{T}\left[\frac{1}{\sqrt{2\pi}}e^{-\frac{d^2}{2}}+d\,\...
1
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1answer
47 views
Arbitrage on Libor and swap market
I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: http://www.interestrateswapstoday.com/libor-rates.html
At the time, I read
...
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0answers
17 views
Quantitative impact of Dodd-Frank Act on risk management
The US Dodd-Frank Act (DFA) introduced mandatory central clearing of standard (e.g. plain vanilla) swaps for big financial institutions in the US in 2013.
It might be a broad question but: what have ...
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0answers
61 views
Black and Normal Model for Caplet using Python
I am able to Price Caplet using Black 76 model in Python. However, I am unable to price the same with Normal Model. Can anyone suggest what is missing ?
I am valuing caplet that caps interest rate on ...
1
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1answer
108 views
Why are interest rate swaps the most popular interest rate derivatives [closed]
Interest rate swaps are the most popular interest rate derivatives. Is there a reason why they are more popular than other interest rate derivatives (e.g. forwards, futures)? Is it because they were ...
2
votes
1answer
76 views
How are Interest Rate Swaps Quoted
Im not sure if this is the right place to ask this question or whether Personal Finance & Money would be a better place. Basically I know that initially interest rate swaps are quoted based on the ...
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1answer
230 views
Swap Curve and Forward Libor Rates
How does the (interest rate) swap curve incorporate forward libor expectations?
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3answers
71 views
heding bond risk with swap
How would a bond trader hedge his/her interest rate risk? A nature way is to hedge it with interest rate swap. Is this a choice in practice ? is their any risks associating with this hedging strategy. ...
2
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1answer
122 views
Hedging Ratios for Fixed Income Instruments
If you buy a corporate bond and you want to hedge the interest rate risk, how would you know how many interest rate futures/swaps to hedge the bond with?
The same with an MBS security, if you want to ...
0
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1answer
390 views
Bootstrap daily OIS forward rate
Can someone please show me how to derive the daily OIS forward rate in a OIS-fixed rate swap?
For example, if price a paying fixed rate/receiving OIS swap in Bloomberg SWPM, Bloomberg will be able ...
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0answers
137 views
Calculate tenor wise DV01 of a Swap in Quantlib Python, i.e. Key-rate Duration
Is there a way I can get DV01 breakup of a Swap across different tenors of the deal in Quantlib-Python. The question asked here, follows the basic method of re-valuing the swap by shifting the curve ...
3
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1answer
118 views
QuantLib in Python : Execution time with OISRateHelper compared to Swap/Deposit RateHelper
I have been working on valuation of interest rate swaps using dual curve bootstrapping. And for this I use OISRateHelper to create a discount term structure using OIS rates. The entire code below :
<...
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2answers
646 views
Mid-curve swaption
I would like to know how the mid-curve swaption could inform us about forward volatility.
In my understanding it is a swaption on a forward starting swap.
Let us say the midcurve swaption expires ...
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0answers
125 views
Why is the annuity factor proportional to the CV01?
For an asset with par amount of one unit (with a semiannual payment regime) we have
$$\frac{C(T)}{2}\sum_{t=1}^{2T}d\Big(\frac{t}{2}\Big) + d(T) = 1$$ $$\implies\frac{C(T)}{2}A(T) + d(T) = 1,$$
...
2
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2answers
62 views
Turning an amortising swaption into a normal swaption
Is there a way to enter a trading strategy in which the notional of the cashflows of an amortising swaption become all the same?
For example, imagine the notional for the first four cashflows of an ...
1
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2answers
454 views
bootstrapping a basis curve to get a forward basis curve
suppose i have a trade whose payoff underlying is 3m libor minus 1m libor.
the standard approach is to bootstrap seperately 2 projection curves: a) a 3m projection curve, b) a 1m proj curve.
however, ...
-1
votes
1answer
179 views
Bermudan Swaptions
Can someone explain, in layman's terms, the mechanics behind Bermudan Swapttions ( without having recourse to pricing models )?
Why are they popular? when are they used ?
How are they hedged i.e ...
0
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1answer
51 views
What are advantages of expressing swaps this way?
On page 420 of Bailey's "The Economics of Financial Markets" textbook there is an example:
"For example, suppose that [in a plain vanilla interest rate swap] the company agrees to pay 9.25 per cent ...
0
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1answer
69 views
Par Rate on an ongoing swap vs a trade startig at spot
Hope you can help me with the following question:
There are two swaps:
- LIBOR 3M vs. fixed 1Y swap, started in the past, has maturity in the future at time X,
- LIBOR 3M vs. fixed 1Y swap, starts ...
0
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1answer
839 views
Mandatory Break clause
Regarding mandatory break clause on Interest rate swaps can someone explain how pricing works with an example. Is it compulsory to terminate the swap or novate on the exercise date. I have seen cases ...
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1answer
65 views
Libor Swap Rates
In a 5 year Libor Swap, say fixed vs. 3 months Libor, what is the credit risk reflected by the fixed leg ? (I'm ignoring counterparty credit risk). Would the fixed leg reflect 3 month Libor quoting ...
1
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1answer
87 views
Valuing a cross currency basis swap using a third currency as a collateral
Suppose India and South Africa goes into a cross currency basis swap. But the collateral is specified upon USD. How does one value this type of swaps? Or is it even available directly on the markets?
0
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1answer
248 views
Hedging amortising interest rate swap with vanilla swaps
Is it possible to hedge an amortising interest rate swap (linearly decreasing notional) with a series of vanilla interest rate swaps? With the amortising swap originated today at par rate and the ...
2
votes
1answer
201 views
How do swap dealers make money from trading cancellable swap?
A fixed-rate payer (e.g. a swap dealer) of a cancellable swap pays more interest than he receives because he has the right to terminate the swap after a certain time if rates fall. What are the ...
0
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1answer
70 views
What's the most direct hedge on rising 12-month LIBOR rate for retail investors?
What is the most direct mechanism available to retail investors to profit from (i.e. hedge against) a future increase in the 12-month LIBOR rate?
e.g. The 12-month LIBOR rate is 2.29% as of 2/1/2018. ...
1
vote
1answer
242 views
Bootstrapping Quantlib RateHelper Python/C++ [closed]
I am pretty new in the Quant areaa and using Quantlib. I found the pretty good introductions concerning bootstrapping in the book QuantLib Python Cookbook by Luigi Ballabio. I wanted to understand the ...
2
votes
2answers
133 views
Transform a 3M FRA Rate to a 6M FRA Rate
I have a question whether it is possible to transform 3M FRA rates to 6M FRA rates without having any spreads available. Let's give an example:
FRA 3M:
FRA 1x4
FRA 2x5
FRA 3x6
FRA 4x7
FRA 5x8
FRA ...
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1answer
2k views
Convert 3M rates to 6M rates using Basis Swaps (3M vs 6M)
How can I convert a 6M Libor rate e.g. 1Y Tenor to a 3M Libor rate using a basis swap 3M vs. 6M? I wanted to know the math and also an example would be great.
Update:
Example:
...
3
votes
1answer
1k views
Use QuantLib Python to calculate Swap DV01
I would want to use QuantLib Python to calculate DV01 of an interest rate swap.
Initially I was thinking of calculating the fixed leg DV01 and floating leg DV01 separately, then add both legs DV01 ...
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0answers
137 views
How to calculate the notional value of an interest rate inflation swap
I am looking at an FpML example of an inflation swap, from Investopedia it refers to a fixed and floating rate multiplied by a Principal Notional Amount however, in the FpML example there is no ...
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2answers
536 views
In curve building: How to calculate interest rate (discount factor) for period before first known effective date
I am building a curve using par swaps rates. For example, I have the following two semi-annual swaps for input
Duration start end rate
1year 14-Nov-2011 14-Nov-2012 ...
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0answers
50 views
Does MV of IRS depend on inflation?
Question: At time=0 company A enters an 3y interest rate swap with a bank, where A recieves floating and pays fixed. After 1y, at t=1, the inflation changes from 1% to 3% does this affect the MV of ...
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1answer
215 views
Using PCA model to capture Risk on a box trade on Swap spread
I have PCA models to capture Risk for Swaps trading
I have a question regarding a multi-leg package which has 4 legs (box spread).
Typically, a box spread is a switch between two Swap Spread, where ...
0
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1answer
498 views
Bootstrapping the spot curve based on swaps
I am struggling to understand bootstrapping the spot curve based on euroswaps. These contracts have a fixed leg paying an annual rate and a variable leg paying either euribor 3m 4 times a year or ...
1
vote
2answers
286 views
FX risk of basis swap in foreign currencies
As an US investor, if I enter a basis swap in a foreign currency (say Euribor-Eonia basis in EUR), and book my trade using USD. I must have some sort of FX risk, right?
How do I hedge such risk? I'd ...
0
votes
1answer
637 views
Collateralized Interest Rate Swap
I am struggeling with the wording "Collateralized" IRS and try to get an understanding out of it based on an example. Especially what it means that in the multi curve models the expectations are ...
2
votes
1answer
529 views
Calculating market value of a vanilla swap at a later date in QuantLib
I am following the cookbook example for pricing a Vanilla Swap in QuantLib Python, given here.
Now let's assume that a week passed, and we are trying to calculate the mark to market value of the ...
3
votes
3answers
6k views
Carry calculation on an interest rate swap
I was hoping that I can get help on a simple yet not so straight forward topic :
Looking at valuing the costs of holding an IRS in the books this would entail marketed-to-market due to price ...
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vote
2answers
445 views
Cross Currency Basis Swap
I understand that there exist a cross Currency Basis between euro and dollar of about 35 bps, which in my understanding can be arbitraged out by following principle of interest rate parity. However, ...
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votes
1answer
330 views
Quantlib: Interest rate swap starting before valuation date
I am trying to evaluate an interest rate swap starting before the valuation date with an amortizing schedule(in Python).
I am using your (i.e. Quantilb) codes but i can't figure out how to solve my ...
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2answers
467 views
Swap Rates Below LIBOR?
In Section 7.5 of Hull 9/e, he states,
Note that 5-year swap rates are less than 5-year AA [LIBOR] borrowing rates
and gives a creditworthiness argument as to why this is so. However, on the next ...
0
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1answer
466 views
Valuing the floating leg of a swap
Let $P_{t}(\pi)$ be the price at time t of a zero coupon bond with time to maturity $\pi$. Furthermore, let $f_{t}(\pi_1, \pi_2)$ be the forward rate that is earned over the time period $[\pi_1, \pi_2]...
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1answer
104 views
Why is there no carry if interest rates follow projected forward rates?
"Carry is a function of the shape of the interest rate curve. When the curve is upwardly sloping (ie, longer
dated rates are higher than shorter rates, as they are currently), then the market is ...
1
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1answer
2k views
DV01 of Interest rate swap
I am a beginner in financial risk management and recently I have been studying the plain vanilla interest rate swap.
I came across several articles talking about DV01 of interest rate swap as follow.
...
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0answers
152 views
Adjoint Algorithmic Differentiation: swap pricing
I have tried to implement an AAD routine to price call options using the Black-Scholes formula, but my greeks are not quite agreeing with the expected ones, so I have decided to start with something a ...
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1answer
408 views
Interest Rate Swap Pre-Settlement Risk
I am kind of confused about how to approach the following question.
Suppose I enter into a interest rate swap (IRS) with counter party C.
Details are : Fixed rate rate receiver, floating rate payer :...
