Questions tagged [interest-rate-swap]

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How to combine DV01s from multiples maturities into fixed ones?

Suppose I have multiples maturities on my book of IRS trades , each one maturing in 15, 35 , 58, 65, 70, 74, 95 (...) days. How do I decompose (or combine) the DV01 for each flow/maturity into fixed ...
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Quantlib: Swaption volatility Data fo calibration

I am working with Quantlib and I use swaptions volatilities data to Calibrate the short rate model. I was wondering what if we don't have these data? can I model swaps and swaptions using QuantLib and ...
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Approximate dollar MTM of interest rate swaps

I'm definitely a fixed income tourist but I'm wondering if there's an easy way to back of the envelope approximate dollar PnL of an interest rate swap For example, if I enter a $1m fixed 5y USD swap ...
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2 answers
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ATM interest rate swap dv01 vs off-market swap dv01

How significant is impact on dv01 of an at-the-money swap if rates move significantly? For example: lets say a 5Y USD at the money swap has 4.6 duration. now, if the rate curve move by 150-200bps, ...
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How to calculate the gaussian VaR for a portfolio with 3 corporate bonds and 1 IRS payer?

As data I have the daily change of zero coupon spot rates for some vertex (0.25, 0.5, 1, 2..) and the daily change of z-spread for corporate bonds, also by vertex
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126 views

Returns of an interest rate swap

I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate ...
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How do I set the fixed interest rate to offer in a swap?

Hypothetically, I want to offer a fixed interest rate swap on a asset that currently has a variable rate. This variable rate is somewhat volatile. How would I derive the fixed rate I should offer?
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How to get forward rate fixing when valuating a swap

Suppose I want to value a (fwd) starting swap, that means I would like to calculate the fixed rate $S_{\alpha, \beta}(t)$. Note, I'm using Brigo's Notation here. We know that the discounted payoff of ...
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3 answers
327 views

Fixed vs float swap interest rate risk

I have some technical questions about what are the best settings in Bloomberg to calculate the interest rate risk of a swap. When Bloomberg calculates the DV01, it simply bumps the par swap curve by +/...
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4 votes
1 answer
340 views

Term SOFR rate formula

The following website gives the specifications of the CME Term SOFR reference rates: CME Term SOFR. Point 1 in the link above specifies that the tenors that are currently supported are 1m, 3m, 6m, and ...
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What is the Performance Total Return Swap (TRS)? How about Performance Fixed TRS and Performance Float TRS?

I just know these products recently: Performance Total Return Swap (TRS), Performance Fixed TRS and Performance Float TRS. But cannot find a detailed explanation of the product, all I can find is an ...
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How Bloomberg calculates discount rates for zero rate curves?

I would like to ask about discount rates calculation algorithm by Bloomberg terminal. In the image above is possible to notice the discount rate for each term. The short end, instruments from 1 DY up ...
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Why LIBOR discount and continuous compounding discount are different?

The reference is Fixed Income Securities by Pietro Veronesi. As you can see, In Table 20.5 when the maturity is 1.25, the LIBOR Discount is 96.7402 However In Table 20.3 with same maturity, the ...
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How to value plain vanilla IRS as portfolio of 2 bonds?

Good afternoon! I am reading a chapter in Hull's textbook about plain vanilla interest rate swaps. He provides example of pricing plain vanilla swap as a portfolio of floating-rate bond and fixed-rate ...
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Returns of interest rate swap

I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate ...
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72 views

Interest Rate Options - OTC vs Exchange, vol difference

I understand that Exchange Traded Interest Options (USD Libor 3m or Euribor 3m) trade with a lower volatility than the respective Cap or Floor for an equivalent structure. Can anyone give any colour ...
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Calculation and Interpretation of EONIA Forward Rate

I am trying to bootstrapp the OIS Discounting Spot Rate curve and the EONIA Forward curve from a range of OIS EONIA instruments, based upon the referenced article 1. My conundrum with understanding ...
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How do you identify nondeliverable swap

what is unique about NDS transactions, how can I identify them using certain parameters or attributes specific to NDS?
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2 votes
0 answers
113 views

Methodology to build a Fed Funds curve post LIBOR cessation

With the transition from LIBOR to SOFR, what is the market standard for building a Fed Funds curve? In the "old days", I believe that one would use Fed Funds futures for the front-end (i.e. ...
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4 votes
1 answer
230 views

Market convention for building the front-end of the SOFR discounting curve

In SOFR Discount Curve Construction in Nov 2021, @dm63 does an excellent job describing the way to build the SOFR discount curve. A few questions: What is the market convention for building the ...
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3 votes
1 answer
232 views

USD swaps trading post LIBOR: the current state of the world (January 2022)

The USD interest rate swaps market has been transitioning from LIBOR to SOFR for some time. In the "old days" when swaps reset against LIBOR underlyings, there were a few "market ...
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1 answer
199 views

VaR on Interest Rate Swaps

I am a newbie and was after a simple explanation on how VaR is calculated for a portfolio of IRS's.
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5 votes
1 answer
190 views

Market Convention to Price Interest Rate Swaps (post LIBOR transition)

Prior to the onset of the Global Financial Crisis in 2008, interest rate swaps were priced using a so-called "single curve framework". Under this framework, the LIBOR curve was used to ...
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1 vote
1 answer
59 views

Floating swap payoff with rate determined on current instead of previous date

I am attempting to determine the payoffs a modified swap, in which the floating payments at a time $T_k$ are made on the current date (i.e. $L(T_k,T_{k+1})\equiv L_{k+1}(T_k)$) rather than at the ...
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Which Model Should I Use for Pricing USD Interest Rate Caps (7, 10, 30 year maturities) on 1Month Rates?

I am trying to price USD interest rate caps on 1M rates (e.g., LIBOR, SOFR, etc.). The caps are designed to limit the exposure on non-callable USD Pay Float / Receive fixed positions in interest rate ...
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1 vote
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96 views

Definition / convention of statements receive 10s30s and boxes

I have a very practical question regarding the terminology of swap / rates trading. What is the exact definition of statements like receive 10s30s. I know that it is the spread between 30y and 10y ...
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2 votes
0 answers
59 views

interest rate swap schedules

Is there a source describing how the schedules(start, end, dcf, payment) involved in a basic IRS are computed? Depending on when the dates are adjusted, the schedules can be different. Thanks
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end-of-month or not for plain vanilla interest rate swap

Quick and hopefully simple question about a standard swap schedule. Let's say we have a plain vanilla 3y fix-flt interest rate swap with cpn-freq = 1, no stubs, in for example EUR. Start date: 2021-11-...
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Annualizing the pay frequency of underlying swaps when bootstrapping the zero curve?

Say I'm looking to bootstrap two zero curves based on two swap curves with different underlying currencies and, consequently, two different pay structures in the swap contracts. For example, say I ...
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6 votes
1 answer
653 views

SOFR Discount Curve Construction in Nov 2021

On July 29, 2021, the Alternative Reference Rates Committee (ARRC) formally recommended the forward-looking term rates based on SOFR published by the CME Group. CME currently publishes Term SOFR for ...
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DV01 formula for an interest rate swap using OIS discounting

I am looking for a formula / approximation to calculate the PV impact of shifting the par swap rate of an interest rate swap in the multicurve setting, e.g. of a swap on 6m LIBOR with OIS discounting. ...
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2 votes
1 answer
123 views

Advice for automating swap curve construction

Let me start by assuming a simple single curve framework, whereby we take input instruments (mm,fra,futures,swaps etc) and strip out a discount-factor curve. Modern implementations of this are usually ...
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139 views

Real rates expectations

What are the drivers of real rates? Nominal = real rates + breakevens breakeven = inflation expectations and what about real rates = ?
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1 answer
178 views

How to measure Steepener/Flattener/Butterfly sensitivity? (in 01)

This seems like a simple concept but I'm a bit lost. How can I calculate the dollar value sensitivity for a yield curve slope or butterfly position? I understand how DV01 can be calculated, but it ...
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47 views

What makes the benefit of defaulted counterparty risk asymmetric in an interest swap?

On page 369 of Quantitative Risk Management (2015) by McNeil, Frey, and Embrechts, there is an interesting example that I do not quite understand. Suppose A makes a floating interest rate payment to B,...
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2 votes
0 answers
111 views

Bermudan Swaption Pricing via Least-Square Monte Carlo

I have some confusion regarding pricing a Bermudan Swaption using LSMC. Let's say the underlying swap has payment dates $T_0 < T_1 < \ldots < T_n$ and for simplicity, assuming the exercise ...
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155 views

Pricing an OIS referencing SONIA with fixing lag

I'm trying to price an Overnight Index Swap referencing SONIA. The swap will have a 5 day fixing lag (i.e using compounded SONIA over the current interest period but with the last rate set 5 days ...
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50 views

Local Evaluation Date in QuantLib

I am trying to construct a price history for swaps in QuantLib, i.e. to have a timeseries of daily prices for a given swap. I have my rates data on each day, but what I'm struggling with is the ...
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Business day convention SOFR swaps

I'm looking for the standard business day convention for SOFR swaps. So for a standard fixed vs SOFR swap with annual payments using ACT/360 on both legs, spot and payment date offset of 2 days each: ...
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2 answers
195 views

IRS - sensitivity to estimation (projection, coupon) curve and discounting curve

The mark to market of an interest swap that is close to zero (e.g., at the swap's inception) has more sensitivity to which curve - the estimation (projection, coupon) curve or the discount curve? And ...
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174 views

How to compute IRS DV01?

Assume 50k notional and annual payments, entering a long position in a 5y interest rate swap will pay 50k * fixed rate (i.e. predetermined 5y swap rate which makes PV equal to zero) and receive 50k * ...
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1 answer
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How to resampling the risk of a specific tenor on a interest rate curve without replace the instrument?

For example, suppose we have an interest rate curve bootstrapped from multiple instruments, at the short end, we used eurodollar future (up to 2Y), at the longer end, we used interest rate swap (3Y to ...
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2 votes
2 answers
247 views

How to account for the credit spread ( e.g. LIBOR + 2%) when using the Multicurve Methodology in valuing a Swap

When valuing an Interest rate swap, counterparties will typically issue the contract at a Libor + credit premium, e.g. Libor +2%. When valuing a swap, we require a LIBOR forward curve and Discounting ...
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0 votes
1 answer
210 views

Is it possible to price a plain vanilla interest rate swap in Python and simulate the price using Hull White 1 Factor Model simultaneously?

I am trying to price plain vanilla interest rate swap (IRS) using QuantLib. What I am trying to do is to generate a path of simulated IRS price by simulating the interest rates using HW 1 Factor model....
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3 votes
1 answer
118 views

Swap Schedule Question

Suppose we are seeking to value two swaps, with tenors of 2Y and 3Y with start dates on 30 Aug 2021 and semi-annual payments. I want to calculate the schedule of payments on the fixed leg. Consider ...
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1 answer
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Using a Swap curve to price Interest rate Swaps

Say we have a 3-m LIBOR IRS (interest rate swap) with quarterly fixed payments (2 year contract), and we want to value this contract (after say 6 months has passed, i.e. there remain 1.5 years to ...
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3 votes
3 answers
402 views

Convexity Adjustment of Daily Compounded Swap under Hull-White Model

I am working on a problem that deals OIS daily compounded swap under Hull-White 1-factor model. I am struggling with pricing the floating leg, on a delayed payment date: $E^{T^p}_t[\prod_{i=0}^{n-1} (...
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1 vote
2 answers
170 views

Rationale for the CMS Spread and CMS Rate as being underlying for Dual Range Accrual?

I was searching on the products issued by the banks to retail investors, and saw some of the Dual Range Accruals having underlying as USD CMS 30Y - 2Y, and USD CMS 10Y, each having low barrier and ...
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1 answer
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Specify fixing days for floating leg in Interest Rate Swap valuation using QuantLib Python

I am trying to price an Interest Rate Swap using QuantLib Python, and everything seems to be fine. However, I can't seem to understand where I can specify the number of fixing days. Below are my codes....
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1 answer
178 views

Constructing a USD LIBOR curve

USD_LIBOR rates are only published up to 12 months. how would you approach constructing the curve to at least a 30-year tenor, to price for example an interest rate swap. I have heard that swaps can ...
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