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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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 ...
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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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Downloading historic yield curve data from bloomberg [closed]
I am a PhD student and I have a couple of problems:
I want to get the US yield curve but I don't know which curve I need.
Once I have identified the curve, I want to download historic data for it.
I ...
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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, ...
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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 ...
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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 ...
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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
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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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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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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 ...
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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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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 ...
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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 ...
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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'...
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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 ...
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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 ...
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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 ...
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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:
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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 ...
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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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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 ...
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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 ...
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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 ...
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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
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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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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.
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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 \...
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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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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\...
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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?
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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?
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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?
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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 ...
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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 ...
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