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.
363
questions
3
votes
0
answers
240
views
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 ...
- 6,425
1
vote
1
answer
6k
views
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 ...
- 41
0
votes
1
answer
1k
views
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 ...
- 1
0
votes
0
answers
255
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 ...
0
votes
2
answers
763
views
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 ...
- 3
2
votes
1
answer
900
views
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
- 27
1
vote
0
answers
453
views
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 ...
- 11
3
votes
2
answers
406
views
SOFR Transition
I have few doubts regarding transition from IBOR to SOFR rates.
How will the method of calculating/estimating curve rates change after changing to SOFR?
Will there be any change in valuation ...
- 115
1
vote
1
answer
161
views
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 ...
- 752
1
vote
0
answers
266
views
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, ...
- 11
1
vote
2
answers
244
views
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 ...
- 437
-1
votes
1
answer
494
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 ...
- 307
3
votes
3
answers
604
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 ...
- 433
0
votes
1
answer
60
views
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 ...
1
vote
1
answer
384
views
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 ...
- 373
4
votes
2
answers
843
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 ...
- 155
0
votes
0
answers
65
views
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 ...
- 1
2
votes
1
answer
273
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 ...
- 31
4
votes
2
answers
1k
views
Repricing SOFR Quotes and Non-Zero NPV
I generated/calibrated a SOFR Curve using Quantlib Python and would like to know why when repricing the swaps have non-zero NPVs. Appreciate any assistance. Thank you.
Parameters
...
- 41
0
votes
0
answers
175
views
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_{...
0
votes
1
answer
201
views
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?
- 1
1
vote
2
answers
651
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 ...
- 469
0
votes
1
answer
94
views
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 ...
1
vote
1
answer
1k
views
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 ...
- 43
0
votes
1
answer
2k
views
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.
...
1
vote
1
answer
474
views
Understanding Asset Swap Spread Example
Here is an overview of the asset swap spread I found online: https://www.deriscope.com/docs/AssetSwaps_LehmanBrothers_2000.pdf
I can't seem to make sense of the numbers in this example:
Specifically, ...
- 469
0
votes
1
answer
2k
views
in bloomberg, how do they calc dv01 per leg of a IRS
note: i am asking about dv01 per leg.
i see the fixed leg has virtually all the dv01, floating has hardly any, which tells me they are treating each leg as a bond in some way.
it looks like they calc ...
- 766
0
votes
1
answer
358
views
What is the difference in the two swap rate as seen in this link? [duplicate]
https://www.chathamfinancial.com/technology/us-market-rates
there are two swap rate, Swaps – Semi-bond and Swaps – Monthly Money. What is the difference between the two rate?
- 341
0
votes
1
answer
178
views
Zero notional on swap leg
Can there be a swap with zero notional on one leg alone? If so, what is the swap used for ?
- 11
10
votes
3
answers
982
views
LIBOR Cessation: Construction of Term-RFRs as LIBOR Fallbacks; Forward vs. Backward Looking
This question emerged from comments in this feed: OIS rate to build Term structure.
I was wondering how the float leg of an IRS will look like in a post-LIBOR world. Assume the following time-line, ...
- 645
3
votes
4
answers
2k
views
What is the relation between the USD Swaps Rates and US treasuries?
I asked this question HERE and redirected to https://quant.stackexchange.com
I understand a swap rate is the fixed leg on a IRS (source), and a swap spread is the difference between a swap rate and ...
- 33
1
vote
3
answers
637
views
Interpolating Libor 9M rate?
Libor atm is:
3M = -0.54486 %
6M = -0.52514 %
9M =
1Y = -0.47443 %
How to retrieve the 9M Libor rate?
- 57
1
vote
0
answers
102
views
Swap curve is unsmooth at front end with naive interpolation
I am looking at swap curve building at front end and find it difficult to get a smooth forward curve with a fast generic algorithm. For example, EUR 6m curve has 6m deposit, and then a series of FRAs (...
- 11
4
votes
2
answers
4k
views
Difference between OIS Rate and Risk-Free Rate
What exactly is the difference between the fixed rate of an OIS and the risk-free rate in that currency. For example, in the US the OIS rate vs. risk-free rate SOFR or in the UK the OIS rate vs. the ...
- 141
-1
votes
1
answer
213
views
Impact of fixing on the valuation of derivatives
I would like to know what is the impact of a fixing on the value of a fixed vs floating interest rate swap (IRS). Also, I have the same question about the fixing impact on a cross currency swap?
On a ...
- 11
7
votes
1
answer
729
views
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?
- 379
0
votes
1
answer
260
views
Replication of European swaption
Suppose we have a European payer swaption with 5-year maturity and 10-year tenor. The underlying is clearly the 10-year tenor payer swap. Does it mean that to replicate the swaption I need to ...
- 1,012
0
votes
0
answers
544
views
Bootstrapping Swap Curve
I am trying to get the zero rates from the swap curve for chilean pesos (vs Camara). I tried this code (from a previuos question similar to mine from other person) and I am very close to get the ...
2
votes
0
answers
915
views
How to find the risk-free rate and dividend rate for S&P 500 index options?
I'm currently working on a project using S&P 500 index options(European) data. I haven't done any empirical experiments before, so I'm confused how to find the corresponding risk-free rate and the ...
- 101
2
votes
1
answer
1k
views
Forward Swap Rate calculation using Quantlib
Here, we have an example for the calculation of Forward Swap Rate - How to compute forward swap rates?
Below is my Forward Swap -
...
- 752
0
votes
1
answer
259
views
How to implement the Gaussian one factor model for Short rate
I am struggling to understand how I should use the Gaussian one factor model for short rate for valuation of a Swaption. Below is my ...
- 752
0
votes
1
answer
344
views
Interest rate swap performance attribution
I have learned some attribution models such as Campisi. It decomposes the return of bond into treasury return, spread return, and coupon return. It works like:
$$r = y\times dt - D \times dy_\text{...
- 31
0
votes
1
answer
238
views
Optimising PnL on an interest rate swap
I recently just got asked the below question. Please help.
"You are about to execute a zero fixed rate vs. Float rate swap under daily cash margining with a client in a normal swap rate curve ...
- 71
4
votes
2
answers
3k
views
Swap curve construction
I am new to this area so my question might be basic to many but please answer.
For valuing interest rate swaps how will we define which curve to take, like sometimes we use usd 3m curve, or usd 3mv 6m ...
- 115
3
votes
2
answers
458
views
Can we think of Overnight Index Swaps as short-term IRS?
OIS are a series of fixed-rate cashflows discounted at the overnight rate, swapped for overnight (floating) rate.
IRS are similarly discounted fixed-rate cashflows, swapped on an IBOR-floating rate.
...
- 55
1
vote
1
answer
406
views
How are SOFR futures contract quotes determined?
I am currently conducting a research on SOFR and have a small question.
Suppose I am in June right now and on the CME website I see SOFR Futures quote for the month of September to be 98.6786.
I wish ...
0
votes
1
answer
370
views
How to calculate basis swap fair spread Using Quantlib 'floatfloatswap'?
I am trying to calculate a single currency basis swap by using the Quantlib floatfloatswap function.
Please advice if I am doing wrongly.
...
- 11
0
votes
1
answer
824
views
float float swap in quantlib
I'm using quantlib to calculate a fair spread of Libor/OIS swap. I have read the reference of ql.Swap and ql.FloatFloatSwap. But the document is too vague. I totally can't understand what parameters ...
- 21
0
votes
0
answers
75
views
Market pricing of forward US Treasury rates
What instrument(s) are used for forward pricing of US Treasuries? I know that Eurodollar futures are used for the market pricing of Libor in the future, but treasury futures only have contracts 3 ...
- 1
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).
...