Questions tagged [interest-rate-swap]

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Curve Building + Swap Pricing [duplicate]

Assume Swap means a USD Swap with standard conventions (semi-annual fixed payments and quarterly floating payments, etc).
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1answer
412 views

Trading Jargon - Interest Rate Swaps / Bond Trading

I was going through some reports but having hard time with the jargon. When I google them online I came across the page: http://volcurve.blogspot.com/2007/10/carry-and-roll-down-back-to-basics.html ...
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369 views

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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1answer
1k views

Bloomberg SWPM: Day count to calculate discount factor for US0003M

I'm trying to replicate price I get for CCIRS in SWPM. This is USD3m float vs RUB 1Y. Second leg doesn't matter for my question. Suppose today is 7th of Jan 2019, deal date. Settlement will happen on ...
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1answer
211 views

Basic question on USD Interest Rate Swap

I am just starting out as a rates and derivatives trader. Can someone please recommend some books for trading USD interest rate swaps (including risk management)? Any additional guidance would be ...
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1answer
978 views

Swaption annuity factor

In H. Corb's book about interest rate swaps and oder derivatives, the present value of an T into n payer swaption is given via $A\sigma\sqrt{T}\left[\frac{1}{\sqrt{2\pi}}e^{-\frac{d^2}{2}}+d\,\...
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3answers
171 views

Arbitrage on Libor and swap market

I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: http://www.interestrateswapstoday.com/libor-rates.html At the time, I read ...
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0answers
21 views

Quantitative impact of Dodd-Frank Act on risk management

The US Dodd-Frank Act (DFA) introduced mandatory central clearing of standard (e.g. plain vanilla) swaps for big financial institutions in the US in 2013. It might be a broad question but: what have ...
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2answers
626 views

Black and Normal Model for Caplet using Python

I am able to Price Caplet using Black 76 model in Python. However, I am unable to price the same with Normal Model. Can anyone suggest what is missing ? I am valuing caplet that caps interest rate on ...
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1answer
197 views

Why are interest rate swaps the most popular interest rate derivatives [closed]

Interest rate swaps are the most popular interest rate derivatives. Is there a reason why they are more popular than other interest rate derivatives (e.g. forwards, futures)? Is it because they were ...
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1answer
386 views

How are Interest Rate Swaps Quoted

Im not sure if this is the right place to ask this question or whether Personal Finance & Money would be a better place. Basically I know that initially interest rate swaps are quoted based on the ...
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1answer
701 views

Swap Curve and Forward Libor Rates

How does the (interest rate) swap curve incorporate forward libor expectations?
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3answers
115 views

heding bond risk with swap

How would a bond trader hedge his/her interest rate risk? A nature way is to hedge it with interest rate swap. Is this a choice in practice ? is their any risks associating with this hedging strategy. ...
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1answer
593 views

Hedging Ratios for Fixed Income Instruments

If you buy a corporate bond and you want to hedge the interest rate risk, how would you know how many interest rate futures/swaps to hedge the bond with? The same with an MBS security, if you want to ...
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1answer
1k views

Bootstrap daily OIS forward rate

Can someone please show me how to derive the daily OIS forward rate in a OIS-fixed rate swap? For example, if price a paying fixed rate/receiving OIS swap in Bloomberg SWPM, Bloomberg will be able ...
3
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1answer
467 views

Calculate tenor wise DV01 of a Swap in Quantlib Python, i.e. Key-rate Duration

Is there a way I can get DV01 breakup of a Swap across different tenors of the deal in Quantlib-Python. The question asked here, follows the basic method of re-valuing the swap by shifting the curve ...
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1answer
348 views

QuantLib in Python : Execution time with OISRateHelper compared to Swap/Deposit RateHelper

I have been working on valuation of interest rate swaps using dual curve bootstrapping. And for this I use OISRateHelper to create a discount term structure using OIS rates. The entire code below : <...
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2answers
3k views

Mid-curve swaption

I would like to know how the mid-curve swaption could inform us about forward volatility. In my understanding it is a swaption on a forward starting swap. Let us say the midcurve swaption expires ...
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5answers
175 views

Physical Delivery of Single Currency Fixed-Floating IRS

In trade data of South American single currency fixed-floating IRS (e.g. BRL with floating rate BRLCDI with deliverable USD) there are many physically settled IRS. What does physical delivery / ...
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0answers
770 views

Why is the annuity factor proportional to the CV01?

For an asset with par amount of one unit (with a semiannual payment regime) we have $$\frac{C(T)}{2}\sum_{t=1}^{2T}d\Big(\frac{t}{2}\Big) + d(T) = 1$$ $$\implies\frac{C(T)}{2}A(T) + d(T) = 1,$$ ...
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2answers
164 views

Turning an amortising swaption into a normal swaption

Is there a way to enter a trading strategy in which the notional of the cashflows of an amortising swaption become all the same? For example, imagine the notional for the first four cashflows of an ...
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2answers
1k 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 seperately 2 projection curves: a) a 3m projection curve, b) a 1m proj curve. however, ...
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2answers
815 views

Collateralized / uncollateralized swap

Is a fully collateralized interest rate swap considered free of counterparty credit risk? Or close to risk free? Therefore discounted by the rate that best proxies the risk-free rate (which is the OIS-...
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1answer
283 views

Bermudan Swaptions

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 ...
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1answer
61 views

What are advantages of expressing swaps this way?

On page 420 of Bailey's "The Economics of Financial Markets" textbook there is an example: "For example, suppose that [in a plain vanilla interest rate swap] the company agrees to pay 9.25 per cent ...
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1answer
186 views

ISDA Convention for definition of IRS maturities

Could someone indicate me what is the ISDA convention for IRS maturity dates ? I mean, when two counterparties enter in a new IRS, is the maturity date to be defined in the contract totally free (ex: ...
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1answer
74 views

Par Rate on an ongoing swap vs a trade startig at spot

Hope you can help me with the following question: There are two swaps: - LIBOR 3M vs. fixed 1Y swap, started in the past, has maturity in the future at time X, - LIBOR 3M vs. fixed 1Y swap, starts ...
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1answer
2k views

Mandatory Break clause

Regarding mandatory break clause on Interest rate swaps can someone explain how pricing works with an example. Is it compulsory to terminate the swap or novate on the exercise date. I have seen cases ...
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1answer
84 views

Libor Swap Rates

In a 5 year Libor Swap, say fixed vs. 3 months Libor, what is the credit risk reflected by the fixed leg ? (I'm ignoring counterparty credit risk). Would the fixed leg reflect 3 month Libor quoting ...
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1answer
169 views

Valuing a cross currency basis swap using a third currency as a collateral

Suppose India and South Africa goes into a cross currency basis swap. But the collateral is specified upon USD. How does one value this type of swaps? Or is it even available directly on the markets?
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2answers
410 views

Hedging amortising interest rate swap with vanilla swaps

Is it possible to hedge an amortising interest rate swap (linearly decreasing notional) with a series of vanilla interest rate swaps? With the amortising swap originated today at par rate and the ...
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1answer
371 views

How do swap dealers make money from trading cancellable swap?

A fixed-rate payer (e.g. a swap dealer) of a cancellable swap pays more interest than he receives because he has the right to terminate the swap after a certain time if rates fall. What are the ...
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1answer
121 views

What's the most direct hedge on rising 12-month LIBOR rate for retail investors?

What is the most direct mechanism available to retail investors to profit from (i.e. hedge against) a future increase in the 12-month LIBOR rate? e.g. The 12-month LIBOR rate is 2.29% as of 2/1/2018. ...
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1answer
416 views

Bootstrapping Quantlib RateHelper Python/C++ [closed]

I am pretty new in the Quant areaa and using Quantlib. I found the pretty good introductions concerning bootstrapping in the book QuantLib Python Cookbook by Luigi Ballabio. I wanted to understand the ...
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2answers
304 views

Transform a 3M FRA Rate to a 6M FRA Rate

I have a question whether it is possible to transform 3M FRA rates to 6M FRA rates without having any spreads available. Let's give an example: FRA 3M: FRA 1x4 FRA 2x5 FRA 3x6 FRA 4x7 FRA 5x8 FRA ...
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1answer
4k views

Convert 3M rates to 6M rates using Basis Swaps (3M vs 6M)

How can I convert a 6M Libor rate e.g. 1Y Tenor to a 3M Libor rate using a basis swap 3M vs. 6M? I wanted to know the math and also an example would be great. Update: Example: ...
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1answer
3k views

Use QuantLib Python to calculate Swap DV01

I would want to use QuantLib Python to calculate DV01 of an interest rate swap. Initially I was thinking of calculating the fixed leg DV01 and floating leg DV01 separately, then add both legs DV01 ...
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2answers
2k views

In curve building: How to calculate interest rate (discount factor) for period before first known effective date

I am building a curve using par swaps rates. For example, I have the following two semi-annual swaps for input Duration start end rate 1year 14-Nov-2011 14-Nov-2012 ...
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0answers
60 views

Does MV of IRS depend on inflation?

Question: At time=0 company A enters an 3y interest rate swap with a bank, where A recieves floating and pays fixed. After 1y, at t=1, the inflation changes from 1% to 3% does this affect the MV of ...
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1answer
389 views

Using PCA model to capture Risk on a box trade on Swap spread

I have PCA models to capture Risk for Swaps trading I have a question regarding a multi-leg package which has 4 legs (box spread). Typically, a box spread is a switch between two Swap Spread, where ...
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1answer
2k views

Bloomberg terminal swap zero curve calculation

I would like to ask about swap zero curve calculation algorithm by Bloomberg terminal. This is a plain vanilla CZK interest rate swap, fixing the Prague IBOR. My task is to calculate zero rates from ...
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1answer
1k views

Bootstrapping the spot curve based on swaps

I am struggling to understand bootstrapping the spot curve based on euroswaps. These contracts have a fixed leg paying an annual rate and a variable leg paying either euribor 3m 4 times a year or ...
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2answers
498 views

FX risk of basis swap in foreign currencies

As an US investor, if I enter a basis swap in a foreign currency (say Euribor-Eonia basis in EUR), and book my trade using USD. I must have some sort of FX risk, right? How do I hedge such risk? I'd ...
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0answers
162 views

Discount rate in IRS valuation

This might be a very basic question but I didn't find the answer in the materials I saw on Google. What is the interest rate used to compute the discounted cash flows for both the fixed and variable ...
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1answer
2k views

Collateralized Interest Rate Swap

I am struggeling with the wording "Collateralized" IRS and try to get an understanding out of it based on an example. Especially what it means that in the multi curve models the expectations are ...
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1answer
994 views

Calculating market value of a vanilla swap at a later date in QuantLib

I am following the cookbook example for pricing a Vanilla Swap in QuantLib Python, given here. Now let's assume that a week passed, and we are trying to calculate the mark to market value of the ...
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4answers
10k views

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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1answer
451 views

QuantLibXL swap valuation fixing dates

I'm trying to build a Excel spreadsheet with QuantLib 1.4 for swap valuation of "live" swaps; IRSs with a start date in the past, and an end date in the future. This is what I've got so far... ...
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2answers
646 views

Cross Currency Basis Swap

I understand that there exist a cross Currency Basis between euro and dollar of about 35 bps, which in my understanding can be arbitraged out by following principle of interest rate parity. However, ...