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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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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Why does the valuation of the floating leg of a swap only use the next payment?
At time $t=0$, swap has zero cost. In fact, both parties may have valued the swap differently based on their zero swap curve-but somehow they agreed. Once a swap is agreed upon it cannot be dissolved ...
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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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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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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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Carry calculation on an interest rate swap
I was hoping that I can get help on a simple yet not so straight forward topic :
Looking at valuing the costs of holding an IRS in the books this would entail marketed-to-market due to price ...
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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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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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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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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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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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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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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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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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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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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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Pricing IRS: bootstrapping zero rate (spot rate) from the swap curve
I would like to ask about swap zero curve calculation algorithm used by Bloomberg. Below is a plain vanilla EUR IRS. I want to calculate >= 2 year spot rates from the market rates. I don't know how to ...
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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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Estimating SOFR daily rate from a given curve
Goodday. May i know how can i estimate those fixing rate in the yellow cell, with the curve given on the left?
Would my step below work
1.perform linear interpolation to find the rate e.g. the fixing ...
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How to value a long term interest rate swap if the floating leg is USD-LIBOR
To value an IRS, you require a spot/zero curve. If I am correct this zero curve will be the USD-LIBOR curve. However, if you have e.g. a 10-year swap that you are trying to value 2 months into the ...
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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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Swap data- couldn't find any
I'm a student and i amm looking for a swaps rates historical data for long tenors in purpose to estimate yield curve (for example in GBP). My question is where could I find it?
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NPV of Interest Rate Swap not coming to be 0 at initiation
I am using the iPython notebook published by Gouthaman Balaraman at [http://gouthamanbalaraman.com/blog/interest-rate-swap-quantlib-python.html][1]
This is to value the Interest Rate Swap. I am ...
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Hull-White-1F swaption price Parameters using tf_quant_finance
Sorry for this rather general question but im new in this field.
I'm asked to model the Expected Expsoure of an interest rate swap.
The Short Rate should be modelled via a 1factor Hull-White model:
$...
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forward LIBOR curve bootstrapping
how can i construct a forward libor curve, which produces forward LIBOR rates, with the given data/info:
par rates of a set of OIS
fixed 6M LIBOR rate
par rates of a set of Swaps which the underlying ...
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How to simulate interest rate index fixings?
When calculating the PV of an interest rate derivative (IRD) that is linked to a rate index $-$ e.g. an interest rate swap $-$ we usually require the actual, or projected, index fixings in order to ...
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Duration of Floating rate bond
I have read in several places that the duration of a floating rate bond is simply the time until next coupon payment, because the upcoming coupon payments are not known. I have 2 questions here:
Why ...
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Quick rule of thumb for DV01 and CS01 calculations
If someone tells me there is a IRS and a CDS both with 10M notional and 5y maturity, is there a reliable quick calculation that I could easily do mentally to approximately calculate their ...
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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 ...
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Compute forward swap rate from spot swap rate?
I am pretty new to interest rate swap and this question might sound silly.
Why does 3y2y (3yr forward and 2yr tenor) swap rate roughly equal to (5*5y swap - 3*3y swap) / (5-3)?
Any explanation would ...
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Can an IRS have a different payment calendar by leg?
I have to model IRS in an IT system and I have a question related to this modeling.
Can an IRS have a different payment calendar by leg ?
Thanks and regards
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Bootstrapping EURIBOR curve
I’m trying to bootstrap a 1m, 3m and 6m euribor curve.
The data I’m using is 3m Euribor swaps, 1m/3m basis spreads and 3m/6m basis spreads. I’ve successfully used quantlib to bootstrap a 3m curve but ...
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Linear Interpolation around End of Month (EOM) for IRS with standard rolls
I have a USD IRS S/A v 3M LIBOR with the following dates:
Effective: 30th April 2018
Maturity: 28th April 2028
(Rolls day of month = 28)
Therefore stub period runs from 30th April 2018 to 28th July ...
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Collateral on Derivative Position
Let say a bank enters an Interest rate swap with a counter-party, and this trade is collateralised.
I have heard about a specific term in such collateral agreement, wherein it states that the interest ...
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Interest Rate Convexity - Fundamental Question
I have a very basic question around convexity adjustments in swap valuations. I am comfortable with the mathematical derivation of the convexity adjustment.
My question relates to when and why a ...
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Work out example of Valuation adjustment
Currently, there are many valuation adjustments for the fair price of a derivative instrument, when pricing is based on RFR. One of such adjustment is ...
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DV01 on IRS giving error in Quantlib for ZAR curve "1st iteration: failed at 14th alive instrument"
I am at my wits end to calcualte the DV01 of a swap but keep getting the error "RuntimeError: 1st iteration: failed at 14th alive instrument, pillar May 28th, 2024, maturity May 28th, 2024, ...
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What does it mean for a coupon bond to have "par value"?
I am doing the Interest Rate Models course on Coursera. In the third lecture of the second week, the lecturer provides this lemma:
Lemma 1
A coupon bond has par value at $T_0$ if and only if its ...
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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 ...
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How to interpret negative fixed rate in Vanilla IRS [closed]
Currently a vanilla 4Y EUR vs. 6M Euribor IRS has a negative price e.g. -0.35%.
I do not understand how to interpret the swap when the fixed rate is negative. If I am the fixed rate payer in this swap ...
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Transition to SOFR Swaps and single curve pricing
As in the US there is a push to replace IBOR based swaps with SOFR rate does that mean that SOFR swap pricing will return to using a single curve framework as LIBOR swaps did pre the financial crisis?
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Valuing TRYUSD currency swap on Bloomberg
Usually a leg in a swap is discounted using the corresponding OIS curve if the deal is collateralized and if collateral is posted in a different currency teh discounting happens with the corresponding ...
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STIR topics: Implied FX-OIS Basis and FX Forward/Swap Pricing
if someone could provide some clarity on the below:
What is meant by 'Implied FX-OIS Basis'? For example: "ON JPY trading at parity, 1W implied OIS basis moved 70BP" and "3M Implied OIS basis moved ...
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Is there no problem when par rate is used for IRS stress-test?
I want to do stress-test such as principle component analysis on IRS(interest rate swap) in order to calculate risk for the future change in interest rate. However it is so confusing which interest ...
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OIS Floating Leg Value at Swap Start with OIS discounting with payment lag
Is it safe/OK/acceptable to assume that $PV_{float}=1$ at on a Swap that projects and discount with the same OIS index, at starting date, if payments are done with a 2D lag i.e. $t_{pay} = t_{...
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Inflation swaps rate vs. Break-even rate
Can someone explain me the difference between zero coupon inflation swap rate and breakeven rate? For example, currently, US 10y zero coupon inflation swap rate is about 1.4%, while US breakeven 10y ...
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Swap Spread Positions with Duration Bias
In practice, how are swap spread positions actually sized and constructed between the two legs? I would suppose the two legs are simply matched in notional terms.
However, in practice, do traders ever ...
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QuantLib constructing yield curve error: root not bracketed
much appreciated if anyone can help with the below, basically i'm trying to construct a yield curve using some real market data. I have pasted the python code below. I use a list of swap rates and ...
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Gamma/Convexity of a Swap vs a similar bond
As a rule of thumb, how would the duration and convexity of a 30y UST bond paying X% compare to the duration and convexity of a matched maturity vanilla interest rate swap, with a similar fixed rate.
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