Questions tagged [interest-rate-swap]

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84 views

Derivation of Swap rate formula

Assuming usual notation, I derive the floating rate and fixed rate payoffs and set them equal. The par swap rate I get thus is: $$S_{mn}\mid_{t=0} = {\sum_{i=m}^{N-1} \tau_i L(0, T_{i-1}, T_i)Z_{0i} \...
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39 views

Duration of forward starting swap

For a spot starting interest rate swap, the duration is calculated as the duration of the fixed rate leg less the duration of the floating leg. Each of these calculations is akin to calculating the ...
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1answer
89 views

Why are Interest Rate Swaps not valued using Monte Carlo Simulations?

the current valuation methods seem to rely on treating the floating payment as deterministic based on the current yield curve and derived forward rates. But wouldnt it make more sense to use monte ...
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1answer
49 views

Tenor bucketing for swap interest rates?

in the place I work I've noticed that for asset class Interest Rate Swaps, tenor bucketing takes place. Example as follow: IRS with maturity 2 month being bucketed into a "3 month tenor bucket" Page ...
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38 views

How to calculate Interest Rate Swap returns

Could someone help me please? I have calculated the Carry + Roll Down of holding IRS of several countries. My Carry and Roll Down is about 5y IRS, holding it for 3 months: 5y3M. So, I have the "...
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1answer
100 views

Eonia swap calculation of floating rate

I'm new to swaps, I've a question about how to calculate the floating rate of an EONIA Swap from market quotation, so that we can keep an eye on the evaluation of our contract Market Value, DV01, etc.....
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1answer
95 views

LIBOR Curve bootstrapping and compounding

I am currently reading about swap pricing based on using the LIBOR curve to calculate spot rates, forward rates, and discount rates. From what I understand LIBOR is quoted as a simple interest rate ...
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1answer
123 views

Why is it desirable to receive fixed on a zero coupon swap, and undesirable to pay fixed on a zero coupon swap?

In most established rates markets, swaps are discounted using risk-free reference rates, such as Sonia in the GBP market and Eonia in the EUR market, as opposed to Libor. Because of the way zero-...
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22 views

MMD rate lock - OAD

would anyone have an idea on how to calculate OAD for Municipal rate lock that has a fixed contractual DV01? or point me to a book/paper
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1answer
83 views

Basis Swap Dual Curve Calibration

The long end of the Libor swap curve needs to be constructed from Basis Swaps because there are no other instruments traded. Can please someone explain the concept of Dual Curve Calibration?
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1answer
135 views

Pricing of compounded swaps

As far as I understand, a compounded swap rolls up individual payments into one final payment which becomes: $$ V(t_n) = N \prod_{i = 0}^{n-1}(1 + d_i L_i)-N $$ where $d_i$ is the day fraction for ...
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1answer
545 views

interest rate swap: PV01 vs DV01

Bloomberg defines PV01 as PV of adding 1 bps on a fixed coupon , while 'DV01' as (down - up principal) / 2 * bps shift. The ...
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1answer
117 views

Curve building for a swap

I'm a student learning how to build a swap curve, I've deposit 6m rate = 5%, fra 6-12m rate = 5.8% and 12m-18m rate= 6% and swap 2y =7% and 3y swap rate = 7.5%. I get the correct discount factors for ...
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3answers
184 views

Is EONIA swap rate really credit risk free?

I have a question linked to the EURIBOR – EONIA spread (or OIS LIBOR spread). I understand that the EURIBOR - EONIA spread is a credit risk indicator of the interbank market. There is something I ...
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0answers
247 views

Swaptions on SONIA/SOFR/ESTR

Given that LIBOR is being decommissioned and we must start building liquidity in swaptions on the OIS swaps, how do we price them? i.e. If I have a swaption on SONIA/SOFR/ESTR etc how does the pricing ...
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1answer
122 views

Find Interest Rate Swap BUMPs from Bloomberg in Excel

I have a bunch of plain vanilla interest rate swap contracts with all the relevant details regarding payment structure such as notional, fixed rate, index, payment frequency, reset convention, etc.. ...
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1answer
100 views

Two questions on Interest-Rate Basis Swap compounding

I have 2 questions on Basis Swap compounding and market conventions. These obviously apply where the reset period is shorter than the payment period Where both fixings have shorter reset period than ...
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0answers
67 views

Valuing TRYUSD currency swap on Bloomberg

Usually a leg in a swap is discounted using the corresponding OIS curve if the deal is collateralized and if collateral is posted in a different currency teh discounting happens with the corresponding ...
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2answers
130 views

Carry vs Roll-Down on a zero-coupon IRS

I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap. Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
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1answer
25 views

In a cleared inflation swap agreement, what determines how much “collateral” a party needs to deposit into the third party escrow account?

Does realized inflation or expected future inflation determine how much money needs to be placed into the escrow account each day?
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1answer
85 views

Interest Rate Swap curve: CMS vs. OIS?

I'm working on a project where we're trying to create a database model where we can (daily) update collected data in order to make RPA predictions. We received data from Interest Rate Curves called ...
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1answer
129 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
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2answers
104 views

What is the difference between a cleared interest rate swap and a OTC interest rate swap with collateral in theory

I understand the aspect that central clearing reduced counterparty risks. From the valuation side, am I right that cash flows for both trades will be discounted at the OIS rate? The party that holds ...
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1answer
224 views

Difference between FRA and a zero coupon swap

Wanted to know the difference between an FRA and zero coupon swap with both legs having payment at maturity. If the zero coupon swap is forward starting, will it be equivalent to an FRA?
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0answers
76 views

Basic question on Plain Vanilla Interest Rate Swap pricing

I'm new to quant and would like to understand on pricing AUD Plain Vanilla Interest Rate Swap. In post/article/book often explain for long end, we use SWAP RATE that are observed in market. But I'm ...
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0answers
49 views

Is the ACT/ACT.AFB convention meant to supersede the ACT/ACT convention for interest rate swaps

https://www.isda.org/a/pIJEE/The-Actual-Actual-Day-Count-Fraction-1999.pdf The determination of day counts are slightly diferrent between ACT/ACT (ISDA) and ACT/ACT(AFB). Is the latter more common ...
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2answers
628 views

Calculating Cross Currency basis swaps

I am trying to calculate cross currency basis swaps for personal use. I generally understand what they are (essentially swapping one currency for another currency on a floating interest rate basis) ...
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4answers
1k views

Why does the ultra long-end of a yield curve invert?

The shape of the yield curve (at least in the GBP Rates market) is upward sloping from the front end up to the long end (i.e. 30y), but then begins to become downward sloping as we go beyond 30y and ...
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0answers
40 views

IRS Valuation to calculate the expected exposure [closed]

I have several levels of fixed rate swap vs. Euribor 6 months from 2007 up to now. I would like to know how to calculate with these data the fixed and floating leg of the swaps. This is a part of the ...
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1answer
94 views

Cross Currency swap - Bond Yields arbitrage

Could somebody explain me step-by-step how can I compute the cross-currency yield of a bond bought by a foreign investor and x-ccy swapped back into his domestic currency? I basically would like to ...
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1answer
101 views

Interest rate swap valuation date convention

When we value interest rate derivatives on any date $t$, we can estimate our future payments using some calibrated forward curve $f_s$, where $s$ is the spot date, and discount these back to $t$ using ...
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3answers
536 views

Interpolating the swap curve

Does anyone know how I can calculate the swap rate in between main tenors for specific dates? For example: what is the implied swap rate in 1 year, 60 days time. Is there an easy way to do this in ...
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3answers
204 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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100 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: ` ...
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2answers
291 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 ...
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1answer
62 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 ...
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1answer
295 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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113 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?
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1answer
96 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)?
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1answer
114 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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1answer
93 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: ...
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1answer
416 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
60 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 ...
3
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2answers
221 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 ...
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1answer
487 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 ...
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1answer
146 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 ...
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1answer
197 views

Linear Interpolation around End of Month (EOM) for IRS with standard rolls

I have a USD IRS S/A v 3M LIBOR with the following dates: Effective: 30th April 2018 Maturity: 28th April 2028 (Rolls day of month = 28) Therefore stub period runs from 30th April 2018 to 28th July ...
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1answer
723 views

Difference between IRS and OIS

Is the understanding right that OIS can be accessed only by banks whereas IRS is for corporates. Also, since corporates borrow at Libor + spread, to hedge Libor I use IRS. Banks can borrow overnight ...
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1answer
286 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 ...