Questions tagged [interest-rate-swap]
The interest-rate-swap tag has no usage guidance.
130
questions
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1answer
72 views
Bootstrapping zero coupon rates
How do we obtain discount rates to obtain zero coupon rates given only swap rates? what is the procedure? Also what exactly is curve calibration?
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0answers
17 views
Bootstrapping with QuantLib using deposit rates and Swap rates
I'm trying to bootstrap and to get a zero coupon yield curve with maturities ranging from 2019 to 2059
Here is my code: `
...
1
vote
2answers
42 views
ISDA SIMM swap sensitivities
Most of the commercial SIMM models require sensitivities to be passed in in CRIF format. The documentation mentions that "par sensitivities" need to be used. What exactly is a par sensitivity? When we ...
0
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1answer
43 views
Swap Pricing - Using forward rates vs using par bond after first floating payment
There seems to be two different methods I have come across for valuing a Interest Rate Swap - specifically the floating leg.
One method described by Hull: incorporates the cashflow from the first ...
2
votes
1answer
51 views
Price Alignment Interest(PAI) Convexity Effect
I've been looking at convexity adjustments in ED's for several years(more opportunities a few years ago then currently) and was wondering if my thinking on PAI impact on swaps convexity is correct.
...
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0answers
52 views
Vega for Constant Maturity Swaps
Why does a Constant Maturity Swap have a positive vega? Is it because of the convexity? How does one hedge it?
0
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1answer
73 views
analytical formula for FV of fixed rate of a IRS [closed]
IRS plain vanilla
- expiry in 5 years
- principal is 1$
- semianual payment
How could the analytical formula be derived for the fair value of the fixed rate (initially no value of the swap)?
0
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1answer
61 views
daycount of the yield curve
Complete characterization of an interest rate requires a few elements:
day count
compounding frequency
the rate itself
start date and end date
That said, I notice that day counts are never displayed ...
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0answers
37 views
Bootstrapping spot rates based on swap rates using QuantLib
I am bootstrapping the shibor curve and fr007 curve using swap rates in China. I created my own index like following:
...
1
vote
1answer
131 views
Swaption valuation across time using vcub
On Bloomberg one has access to the rates vol cube with the VCUB function. For a given currency, today, one sees Black implied volatilities for swaptions of various expiries and strikes, for forward ...
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1answer
46 views
Multi-legged Swap pricing
can anyone guide me how to price a multi-legged swap and whether I need Monte Carlo / LMM based approach or if there is a closed form solution.
Receive leg
"Libor 3m +1%"
Payment leg
If Libor is ...
2
votes
2answers
111 views
In Arrears Swap - what accrual period applies?
In Arrears Swap, the floating rate is reset and paid on the same date.
What accrual period is applied to compute the payment -
If the dates are t1, t2, t3 ...tn.
(assume overlapping date schedules ...
0
votes
1answer
101 views
Calculate forward discount factors and forward reference rate when discount factors are known
I am trying to learn how to value interest rate swap through portfolio of FRA's(forward rate agreement).But I have got stuck in calculation of floating leg.
Here is the scenario as given below for ...
1
vote
1answer
90 views
What's the difference between instantaneous forward rates and observable forward rates?
Source:
http://docs.fincad.com/support/developerFunc/mathref/LIBORMarketModel.htm
"In contrast to models that evolve the instantaneous short rate (Hull-White, Black-Karasinski models) or ...
1
vote
1answer
107 views
Bermudan Swaption
Is there an equation of the kind of call-put parity for Bermudean swaptions ? (maybe an inequality )
Is there an intuitive description of what would be an optimal exercise moment ? Intuitively I ...
3
votes
1answer
229 views
IMM Swaps - Accrual & Fixing Schedule
I am wondering how accrual periods & reset dates on Quarterly-IMM swaps are different to normal swaps (in terms of conventions). For example:
Normal Swap:
...
1
vote
1answer
46 views
Port a model dependent swaption sensitivity to a new model
I have a short rate model in which I have (among others) the following metric (for leverages) for a swaption : $$L = \frac{\frac{\partial}{\partial r}V_0^{\textrm{Swaption}}}{\frac{\partial}{\partial ...
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0answers
86 views
Curve Building + Swap Pricing [duplicate]
Assume Swap means a USD Swap with standard conventions (semi-annual fixed payments and quarterly floating payments, etc).
3
votes
1answer
277 views
Trading Jargon - Interest Rate Swaps / Bond Trading
I was going through some reports but having hard time with the jargon. When I google them online I came across the page: http://volcurve.blogspot.com/2007/10/carry-and-roll-down-back-to-basics.html
...
1
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0answers
251 views
Interview question on interest rate spread trade
Consider this interview question:
Tell me how you'd construct a risk neutral cross country trade on the 2 year – 10 year interest rate spread in Germany and the U.S.
What does "risk neutral" mean ...
-1
votes
1answer
601 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 ...
1
vote
1answer
160 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 ...
2
votes
1answer
409 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
vote
1answer
69 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
...
1
vote
0answers
20 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 ...
2
votes
2answers
336 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
vote
1answer
168 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
167 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 ...
-1
votes
1answer
575 views
Swap Curve and Forward Libor Rates
How does the (interest rate) swap curve incorporate forward libor expectations?
1
vote
3answers
92 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
votes
1answer
282 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
votes
1answer
909 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 ...
2
votes
0answers
273 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
votes
1answer
230 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 :
<...
1
vote
2answers
2k 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 ...
1
vote
0answers
440 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
votes
2answers
113 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
vote
2answers
818 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
246 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
votes
1answer
58 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
73 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
1k 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 ...
0
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1answer
74 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
vote
1answer
108 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
325 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
288 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
101 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
340 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
191 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 ...
1
vote
1answer
3k 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:
...
