Questions tagged [interest-rate-swap]
The interest-rate-swap tag has no usage guidance.
198
questions
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Day-count conventions for the floating leg of an asset swap
Which is the day-count convention in order to compute the floating leg of an asset swap? I don't know if it is: Act/360, Act/365, 30/360 or 30/365.
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1answer
59 views
Macaulay duration of an IRS receiver [closed]
how can I compute the duration of an IRS receiver? and how can I use it to compute the Delta of IRS?
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1answer
49 views
price of IRS receiver fixed rate [closed]
I have price a IRS receiver fixed rate, and I am told to approximate the PV of IRS with a long fixed rate bond, with coupons assigned by the swap rate and face value equal to the IRS notional, and a ...
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1answer
42 views
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1answer
50 views
Hedging Interest rate swaps in practice
Suppose we have a portfolio of i terest rate swaps that we wish to delta hedge. we build a delta ladder by shocking the instruments used to build the forecasting and discouting curves (Eurodollar ...
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2answers
112 views
What do you think of 50y swap at -0.58%?
To start an exchange of ideas, what do you think of the 50y eur swap at -0.58%?
At this moment, the carry for paying 50y fixed is positive and the low liquidity of long tenors is shaping the curve in ...
1
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1answer
54 views
Proper Method for pricing Interest rate swaps using dual curves
I am aware that under the dual curve method for pricing standard collateralized fixed floating interest rate swaps, that first a discounting curve should be constructed e.g. OIS Discounting curve, as ...
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0answers
38 views
How do you annualize an OIS rate?
I understand how this works for an annual reset, 1y OIS. In the case of India (ACT/365), for example, let's assume this OIS fix is 5.00% and remain so everyday. Then the realized OIS rate after 1 year ...
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3answers
121 views
Are forward rates for an IRS computed between reset dates or between start dates?
In order to price the floating leg of an IRS I am computing forward rates for future coupons, but I'm not sure whether I have to compute such rates between reset dates or between start dates.
My ...
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1answer
107 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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0answers
47 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 ...
0
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1answer
106 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
60 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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40 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
126 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
130 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
143 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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0answers
30 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
86 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
149 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 ...
4
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1answer
769 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 ...
2
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1answer
118 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
214 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
283 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
156 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
104 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
70 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
137 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
27 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
95 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
141 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?
2
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2answers
125 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 ...
3
votes
1answer
251 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
80 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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52 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 ...
3
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2answers
1k 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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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
106 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
111 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
639 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
260 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
126 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: `
...
3
votes
2answers
326 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
65 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
333 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
122 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
100 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
118 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 ...
