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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 is swap rate calculated for a vanilla swap when there is a lag between the trade date and the start date

Take a vanilla EURIBOR swap and suppose that the start date of the swap is equal to the trade date. To compute the swap rate, you say that the value of the swap at the trade date must be zero, which ...
EricFlorentNoube's user avatar
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IRS with early termination provision

I have an IRS with an early termination clause (Bermuda style). Do I value it as always or does it have any impact on the value?
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OIS MEETING DATES [closed]

STEEPENERS AND fLATTENERS. IF i WANT TO PUT ON A STEEPNER IN ois DO I BUY THE FRONT END AND SELL THE BACK END ? VICE VERSA for flattener. if I am payer of lets BOE MPC in september does that mean I ...
EarlyFx's user avatar
2 votes
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Calculating value of vanilla swap after effective date

I'm trying to find the value of a fixed to float interest rate swap using Rateslib library but I'm running into a few issues. I've followed the code exactly as the link here but now I'm trying to ...
rubiks99's user avatar
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Macro Hedging Bond Index Total Returns with IRS to get Excess Return over Swaps

I have the historical total return and duration index data for a bond index, and I want to get the excess returns, over swaps. I have access to historical swap rates from bloomberg. How can I ...
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Carry Roll Calculation for Interest Rate Swaps in Nordea Note

In the Nordea note linked in few other posts related to carry roll calculation there is a calculation/example for the formulas provided. https://corporate.nordea.com/api/research/attachment/2796 I'm ...
nichel's user avatar
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Carry and Roll on Interest rate Swap [duplicate]

Only spot starting swaps have a known fixing, F(0,6m). There’s no carry in a forward starting swap as there’s no certain payments (on the float leg). This is claimed in an excellent research note by ...
Pavan Sharma's user avatar
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How does Bloomberg calculate reset rates for a fixed to floating swap?

I believe Bloomberg uses daily compounded sofr rates to calculate the reset rate for a cashflow period. My question is when I take the data from S490 curve - USD SOFR curve directly and linearly ...
sharath chandra's user avatar
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Rates Curve 'Realising' vs 'Rolling'

Just saw an exchange on X and would appreciate if anyone could try their hand at going into a bit more detail (and even maybe using an example) to breakdown the conceptual difference of rates curves '...
barnslinger's user avatar
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Regression swap vs bond future

I have to perform a regression to get an hedge ratio. The dependent variable is the change on day of a swap fixed rate (f.i. 10y) and the independent variable is the change on day of a bond future ...
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Interest Rate Swap versus Cash Bond

From the point of view of a leveraged fund manager, what is the benefit of buying a bond when the same could be expressed through an OIS swap? Assuming, of course that the swap is not mispriced i.e. ...
Pavan Sharma's user avatar
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Interest Rate forward calculation [closed]

I have come across two formulas for the forward interest rate computation.These are given below. 1)((Df1/Df2)-1)/(T2-T1) 2) (R2T2-R1T1)/(T2-T1) I do not understand when should i use which one of the ...
toobigtofail's user avatar
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Calculating Implied rates from OIS and Futures

I've been trying to figure out how to calculate the implied rate for interest rate decisions by central banks using OIS and came across an explanation that I can't quite wrap my head around: Apart ...
Man Dem's user avatar
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QuantLib swap Fair Rate not the same as the constructed curve nodes

I'm having trouble getting the same nodes when evaluating Fair Rates for a Mexican TIIE swap. I think my problem is in the MXNOIS curve creation, but I'm not sure. For evaluating, I am creating the ...
Fiesteban's user avatar
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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 ...
Man Dem's user avatar
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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.
CurveGamma's user avatar
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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 ...
gardensnake's user avatar
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1 answer
150 views

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), ...
user131113's user avatar
3 votes
1 answer
112 views

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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220 views

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 ...
anon123SA12's user avatar
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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,...
User27's user avatar
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2 votes
1 answer
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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
1 vote
1 answer
697 views

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
1 vote
1 answer
159 views

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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2 votes
1 answer
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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, ...
John83's user avatar
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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
1 vote
1 answer
236 views

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
1 vote
1 answer
194 views

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 ...
soroso's user avatar
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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 ...
ml4irs's user avatar
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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'...
SG Hwang's user avatar
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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
376 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 ...
SI7's user avatar
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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 ...
Nc27's user avatar
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2 votes
1 answer
485 views

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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2 votes
1 answer
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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 ...
Magnyz's user avatar
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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 ...
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