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.

Filter by
Sorted by
Tagged with
0 votes
1 answer
39 views

Pillar Date of Overnight Interest Swap Helper

I am not being able to set the pillar date of an overnight interest swap helper to its maturity date. I have the following code: ...
0 votes
0 answers
68 views

Discounting the cashflows in IRS by risk free rate

Let say I have a IRS contract where float rate is determined by some LIBOR variant. Almost all textbooks I had considered, tell ...
8 votes
1 answer
14k 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 ...
0 votes
2 answers
634 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 ...
0 votes
1 answer
62 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 ...
1 vote
1 answer
385 views

BLOOMBERG Strike vs Straddle Volatility

In Bloomberg's VCUB, what is the difference between the "strike" volatility and changing this option to "straddle"? It seems like the "straddle" vol should be the same as ...
1 vote
1 answer
84 views

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 ...
6 votes
2 answers
170 views

Replicating QuantLib plain vanilla Interest Rate Swap valuation

I'm learning QuantLib-Python and trying to replicate an Interest Rate Swap valuation on a custom curve constructed by passing lists of dates and discounting factors. Please see my code below ...
0 votes
0 answers
33 views

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}, ~...
0 votes
0 answers
66 views

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 ...
2 votes
0 answers
53 views

Should I use the yield curve or swap curve to find the value of my swap? [closed]

The PiVe Capital Swap Spread Trades' case study (in Fixed Income Securities from Pietro Veronesi) suggested that in pricing a swap, using a swap curve appears to be the most reasonable methodology. ...
2 votes
0 answers
40 views

Relation (approximate??) between Swap rate and Cap strike

I just have come across some relation between Interest rate swap and strike of Cap as below $K_{Cap Strike} = \frac{1}{1 + r \...
0 votes
3 answers
1k 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 +/...
1 vote
0 answers
149 views

Duration of interest rate swap - seek explanation from a previous post

I have come across a Q&A about the calculation of the duration of an interest rate swap on this site. In the Q&A, the derivative is calculated as: $\frac{\partial PV}{\partial r}=t_nD(t_n)+q\...
1 vote
2 answers
578 views

OIS example in Hull's book

In Hull's book (9th edition), on pages 202-203, there is an example for computing the payoff of an OIS that I am confused about. It says suppose in a US 3-month OIS the notional principal is \$100 ...
3 votes
1 answer
4k views

How to compute for basis adjusted forward rate?

To give you a brief background, I'm valuing a fixed-for-float Interest Rate Swap (IRS) using Bloomberg. I put in a notional amount in (USD) and a assigned 6MO USD LIBOR as the reference index for the ...
1 vote
0 answers
33 views

Par par asset swap counterparties in practice

In practice is it possible to enter into a par par asset swap where the bond is purchased from counterparty A and the swap element is conducted with counterparty B?
0 votes
1 answer
163 views

Higher coupon on interest rate swap has higher DV01

Why the higher the fixed rate of a swap is, the higher the DV01 will be?
4 votes
2 answers
784 views

Different types of swaps and generalized pricing structure - correlation swap, variance swap, volatility swap, gamma swap, etc

I am very new to derivatives pricing, and I am currently trying to learn these on my own. As far as I can tell, most of the derivatives that are simple (in the sense of having a constant strike that ...
2 votes
0 answers
79 views

Quantlib: Problem with discount curve with different settlement days than the swap curve

When pricing a interest rate swap, I use the swap curve to price the instrument and the corresponding OIS curve to discount it. However, for some countries (eg Canada), the IRS curve settles on the ...
2 votes
0 answers
81 views

What is the scope of spot lags and spot dates?

In the context of interest rate derivatives, we often speak of the spot date. But of course, there is not a "the" spot date, because there are multiple spot dates, for example for different ...
0 votes
1 answer
241 views

Calculating the volatility of an interest rate swap

At its most basic the volatility of an instrument is the standard deviation of its return series over time calculated as percentage change of the price series. How would this work for interest rate ...
1 vote
1 answer
327 views

MtM of interest rate swap if forward rates are realised

It might be a very simple question but for some reason I’m a bit confused. Let’s say we enter a long SOFR vs fix interest swap at par. Say 5 year swap with annual coupons (the rfr is daily compounded ...
0 votes
1 answer
66 views

How to read the notation used for the swap rates in the form 4.412/452 for the 1 year swap rate?

How to read the notation used for the swap rates in Table 20.6 below? What does 2.412/452 means?
4 votes
1 answer
115 views

Quantlib Slow valuation of ois_swap on multiple eval days

I have bootstrapped a curve using several depo and swap rates and am trying to use that curve to get the NPV of a swap over a period of time. The generation of prices iteratively through time is ...
2 votes
0 answers
40 views

PTP 10% Withholding [closed]

Apparently there's a new IRS rule that can be summarized as "starting January 1st, 2023, investors who are not U.S. taxpayers must withhold 10% of proceeds from the sale of PTPs (Publicly Traded ...
2 votes
1 answer
270 views

Cash flow mapping on multi curve framework

I am trying to map cash flows according to FRTB pillar dates, on an Interest Rate Swap fixed Vs Euribor 6 months. Using the sensitivity preserving approach, under the OIS framework, this has to be ...
1 vote
1 answer
290 views

IRS Payer/Receiver swap dv01

I was just wondering whether it was possible for long payer swaps to have a negative dv01 and vice versa for a short payer to have a positive dv01? Intuitively by definition of payers and receivers I ...
3 votes
1 answer
51 views

Quantlib: how to construct CDOR volatility cube? Getting error when using SwapRateHelper

...
1 vote
0 answers
188 views

Total Return Swap (TRS) on Convertible Bond

Is there any relevant paper/source I can look at for pricing TRS on convertible bond? Specially, how should I evaluate the asset return leg? Let's say I already have an convertible bond pricer that ...
1 vote
1 answer
155 views

how is accrual calculated on the floating leg of a OIS swap

for Libor swaps, the accrual for the floating leg is easy as the cashflow is known already at accrual start day. The calculation would be similar to how the accrual of a bond is calculated. How about ...
5 votes
0 answers
168 views

Most relevant papers on IR / discount rate(s) modelling in the last 5 years

As the question states, what are some relevant recent papers I, as a non-expert, should read on IR modelling, products, and mechanics (that do not involve AI/ML)? I think my knowledge on this topic ...
1 vote
0 answers
172 views

Improving Fixed-Fixed Cross-Currency Swap Pricing in Python with Limited Data and Quantlib

I am working on creating a fixed-fixed cross-currency swap pricer in Python for EUR-USD and GBP-USD pairs. Here's my current approach: Bootstrap a GBP SONIA curve. Bootstrap a SOFR curve. Obtain the ...
0 votes
0 answers
29 views

what is the problem of using asset swap spread to compare bonds

people use asset swap spread to compare bond relative values (rich/cheap). is there a known issues or anything that needs to be aware of when using swap spread to compare relative value of bonds?
0 votes
0 answers
70 views

Find the spread of an Asset Swap Spread

An Asset Swap Spread contract exchanges the annual defaultable coupons computed on the defaultable term structure $SPS^1$: $$ SPS^1 = {i^1(0,1) = 0.025; i^1(0,2) = 0.03; i^1(0,3)=0.018} $$ versus s ...
1 vote
1 answer
136 views

Understanding how markets predict BoC's policy interest rate decisions

I read in the newspaper things like, Interest rate swaps, which are based on market expectations about future rate decisions, are pricing in at least one Bank of Canada rate cut later this year, and ...
3 votes
1 answer
3k views

How to compute forward swap rates?

I am trying to compute shocks on the forward swap rates based on shocks to the swap rate curve (aiming at repricing consistently a set of swaps and swaptions based on a shock to the swap curve): It ...
-1 votes
3 answers
3k views

NPV calculation of past flows [closed]

I have a theoretical question concerning NPV calculation of financial products. I know how to calculate it when future flows have to be estimated, but I am wondering how to calculate past flows. In ...
3 votes
3 answers
551 views

EPE for interest rate swap

Hey how to calculate Expected positive exposure in the case of interest rate swap? Assume that I simulate $M$ interest rate paths for time grid $0=t_0\le t_1 \le ... \le t_N = T.$ What is the ...
0 votes
0 answers
118 views

P&L explain for swap?

I try to make a P&L explanation of a swap from the delta, gamma, to the N instruments of the rate curve (money market, futures and swap). I use a perturbative shock of 1bp for each instrument of ...
1 vote
0 answers
67 views

forward starting interest rate swap trade settlement date

Say today is 13rd Dec 2022, For a spot staring swap, its settlement date would be 15th Dec 2022 assuming the settlment offset is 2 days. What is the settlement date for a one year forward starting ...
22 votes
4 answers
44k views

Difference between OIS Rate and Fed Funds Rate

I understand Fed Funds Rate is the rate at which banks lend/borrow to/from each other to maintain their daily reserve requirements at the Central Bank; also it is unsecured-meaning no collateral. Is ...
2 votes
1 answer
622 views

Simplified formula for duration of interest rate swap

Lets consider the simple interest rate swap instrument as 5-year maturity interest rate swap. I found an interesting simplification to calculate the duration of such swap as, $\frac{\left(1 - e^{-r_t *...
4 votes
1 answer
4k views

What is Dual Curve Bootstrapping? And how to do it, with an example?

I am starting to explore this area. My ultimate aim is to build a 3 month LIBOR forward curve. I wish to know what exactly 'Dual Curve Bootstrapping' is (If someone could explain it in clear words). ...
0 votes
2 answers
989 views

How to quickly calculate PV01? Or quickly calculate notional back given PV01 and duration?

is there a way to quickly calculate the PV01 of for example for a swap EUR fix floating 10 years? And is it possible to calculate the Notional, with a given PV01 and the years of the trades or ...
0 votes
1 answer
80 views

How OIS swap rates behave when we receive or pay OIS swap rates?

I am reading a news article regarding how OIS swap rates behave when we receive or pay OIS swap rates. The article states that when we receive OIS swap rates it makes swap rates fall. When we pay swap ...
0 votes
0 answers
98 views

Confusion about Initial Pricing IRS with Dual Curves

This is my first time delving into dual curves, or multiple yield curves. A question struck me about using OIS discounting when choosing the swap rate of a new IRS. Without multiple yield curves I ...
1 vote
1 answer
577 views

Par rate of Interest Rate Swap

I'm interested in deriving the par rate of an interest rate swap priced under the single curve framework. Let's follow the corresponding Wikipedia article for the sake of notation simplicity. The ...
6 votes
1 answer
302 views

Use of interest rate swaps in liability-driven investing

You probably have home across recent events in the UK bond markets. The Financial Times article "The reason the BoE is buying long gilts: an LDI blow-up" from Sep. 28, 2022 goes through why ...
-1 votes
2 answers
803 views

Bermudan Swaptions [closed]

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 ...

1
2 3 4 5
8