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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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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 ...
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1 answer
513 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 ...
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1 answer
130 views

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 ...
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 ...
0 votes
1 answer
4k views

Compute I-spread from ASW-spread (or vice versa)

The I-spread ("mid swap spread" or yield-yield spread) is a standlone measure of credit risk, a security against matched maturity vanilla swap rate. Consider a package in which the investor receives ...
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1 answer
454 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?
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1 answer
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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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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 ...
1 vote
1 answer
116 views

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 ...
-2 votes
1 answer
512 views

Why is carry divided by DV01 to scale it?

If I understand correctly, 6M carry in a fixed-floating interest rate swap should be the difference between the fixed and floating leg. When I read this on Page 2: https://corporate.nordea.com/api/...
-1 votes
1 answer
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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 ...
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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 ...
1 vote
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Interview question on interest rate spread trade

Consider this interview question: Tell me how you'd construct a risk neutral cross country trade on the 2 year – 10 year interest rate spread in Germany and the U.S. What does "risk neutral" mean ...
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1 answer
149 views

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. ...
2 votes
0 answers
127 views

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 '...
1 vote
2 answers
308 views

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), ...
2 votes
1 answer
200 views

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 ...
10 votes
1 answer
19k 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 votes
2 answers
520 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 ...
-1 votes
1 answer
643 views

Whos OIS rate? Is there only one?

I have a hard time understanding the OIS rate. My understanding is that this is the rate someone is willing to exchange federal funds rate over say 10 years to someone else. For example, some bank pay ...
33 votes
3 answers
59k views

What is the Swap Curve?

What is the so-called Swap Curve, and how does it relate to the Zero Curve (or spot yield curve)? Does it only refer to a curve of swap rates versus maturities found in the market? Or is it a swap ...
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1 answer
64 views

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 ...
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1 answer
278 views

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 ...
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1 answer
145 views

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 ...
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1 answer
492 views

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-...
1 vote
1 answer
234 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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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 ...
0 votes
1 answer
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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 ...
-1 votes
1 answer
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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.
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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 ...
1 vote
2 answers
1k 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
5k 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 ...
0 votes
1 answer
147 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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72 views

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 ...
0 votes
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73 views

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 ...
1 vote
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86 views

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 ...
2 votes
0 answers
92 views

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 ...
1 vote
2 answers
2k views

bootstrapping a basis curve to get a forward basis curve

Suppose I have a trade whose payoff underlying is 3m libor minus 1m libor. The standard approach is to bootstrap separately 2 projection curves: a) a 3m projection curve, b) a 1m proj curve. However, ...
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1 answer
2k views

One Way CSA Agreements

This is probably an older topic but I don't seem to find any related threads on this forum. What is the best way to value, let's say, a vanilla IR swap (you receive fixed) that you trade against a ...
0 votes
2 answers
310 views

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 ...
1 vote
1 answer
608 views

Interest rate swap Profit and loss attribution

I am wondering how the IRS daily PnL will normally be attributed from trader's/market risk perspective. Will it be broken down into three parts daily carry (Daily interest accrual), daily roll-down (...
0 votes
1 answer
106 views

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 ...
1 vote
2 answers
378 views

Plotting a CSA curve in QuantLib

IRS under a CSA Let's consider an example of Interest Rate Swap under a CSA. To calculate discount factors that can be used to discount cashflows in one currency, $C_{1}$, collateralized in another ...
3 votes
1 answer
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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 ...
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215 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 ...
3 votes
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227 views

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,...
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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 ...
1 vote
1 answer
158 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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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 ...
3 votes
3 answers
8k views

How to build a cross currency swap pricer?

We're looking to build a pricer to convert a funding spread in a given currency over a specific funding basis e.g. 20 bps EUR 3m€ and convert it to a funding spread to a different currency with a ...

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