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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Quantlib: convert par swap rates to zero rates back and forth
I built a zero-coupon curve out of a generic par swap rate curve (Step 1) and I am trying to recover the swap curve back from the zero-coupon curve (Step 2).
Step 1 works but not Step 2. I get close ...
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Interest Rate Swap Question
I am new to IRS. Pay 2Y HKD-USD IRS spread. It is a trade idea recommendation. Can someone explain what this trade entails? Does it mean paying fixed and receiving 3m USD LIBOR over 2 years? Please ...
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What is the best way to hedge a position with negative interest rate?
Suppose we have a following situation:
$1).$ Company A takes a loan from Bank A at a floating interest rate.
$2).$ In order to offset the payments at floating interest rate, Company A enters into an ...
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Payer and Receiver Swaption
What is a delta of a payer and a receiver swaption? Is it negative for receiver swaption and positive delta for payer swaption?
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Value a Swap with Custom Coupons with QuantLib
I'd like to valuate a custom Libor3M - Fix swap with QuantLib in Python. With custom I mean, custom starting/end/payment dates for every coupon, a fixed coupon in the float leg (starting_date < ...
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Splitting a spot swap into a forward swap and a 3 month libor
I read the following statement:
We can construct a 5 year swap using 3 month libor combined with a 3mo-4.75yr forward swap, weighted by the dv01s of each part.
I am not sure I understand how this ...
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Libor transition to SOFR - swaps after 2021
Assuming that Libor will fully transition to SOFR by the end of 2021. How are swap rates after 2021 currently priced to reflect this? For example, if I am looking at 5 year US swap rate, doesn't this ...
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Interest Rate Swap Delta ladder, under OIS Discounting
I've been looking on some information when it comes to vanilla Interest Rate Swaps, and building delta ladders under a multicurve environment. IR Swaps - Curve sensitivity at maturity node, this ...
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Different FEDFUND INDEX use for Basis swap with LIBOR and SOFR
I am trying to understand the compounding in Basis Swap. I had 2 type of basis swap trade as below
USD SOFR FF BASIS LCH – compounded FF (USD-Federal Funds-H.15-OIS-COMPOUND)
USD LIBOR 3M FF 3M BASIS ...
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How to compute forward swap rates?
I am trying to compute shocks on the forward swap rates based on shocks to the swap rate curve (aiming at repricing consistently a set of swaps and swaptions based on a shock to the swap curve):
It ...
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What are reset periods/dates in relation with interest rate swaps?
Let's assume I have a 2-year fixed-floating swap, the floating leg has a quarterly reset.
Does this mean the valuation is done every 3 months for the floating leg? (and the total value of these 4 ...
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In an interest rate swap, is the first payment based on the floating and fixed values set at inception?
Let assume 2 parties agree a plain vanilla swap with the following terms:
Notional: $100,000
Length/Tenor: 3 year
Payment/Settlement Periods:
Annual Start Date: 01/01/2021
Floating Rate on Start ...
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Par par asset swap mechanics
Can a market practitioner explain how par par asset swaps work? I understand the swap fixed leg has the same details as the bond i.e. the fixed rate is equal to the bond coupon rate. The way I look at ...
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Uncollateralized cross currency swap valuation
I want to value an uncollateralized cross-currency swap to exchange EURIBOR 6M for JIBAR 3M (Johannesburg Interbank Average Rate).
I have a few questions:
What discount curves should I use?
From ...
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When pricing interest rate swaps at inception, should the fixed rate or floating rate be priced first?
In an interest rate swap, when pricing at inception (e.g. making sure the NPV is zero at inception), is the fixed rate set first and then the floating rate calculated (or vice-versa, e.g. floating ...
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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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How determine swap rate with binomial tree
The risk free rate is $0,01$ while the risky rate follows a $2$ period binomial model and the risky rate at time $t=0$ is $1$, where $u= 1.5$ and $d=0.6$.
How can I determine a swap rate of IRS with ...
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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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Back of the enveloppe forward irs pricing
trying to have a back of the enveloppe way of working out generic forward starting swap rates like 2y2y or 5y3y to put in a spreadsheet without too much loss of accuracy. Whats a good way to look at ...
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Why do increasing spot rates have to be equal to or larger than the corresponding par rates?
Definitions
Spot rate: the interest rate applied to a given spot investment to be repaid at maturity, as a single cash flow.
Par rate: the interest rate such that the PV of the cash flows (lets say ...
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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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Day-count conventions for the floating leg of an asset swap
Which is the day-count convention in order to compute the floating leg of an asset swap? I don't know if it is: Act/360, Act/365, 30/360 or 30/365.
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Macaulay duration of an IRS receiver [closed]
how can I compute the duration of an IRS receiver? and how can I use it to compute the Delta of IRS?
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Hedging Interest rate swaps in practice
Suppose we have a portfolio of i terest rate swaps that we wish to delta hedge. we build a delta ladder by shocking the instruments used to build the forecasting and discouting curves (Eurodollar ...
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What do you think of 50y swap at -0.58%?
To start an exchange of ideas, what do you think of the 50y eur swap at -0.58%?
At this moment, the carry for paying 50y fixed is positive and the low liquidity of long tenors is shaping the curve in ...
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OIS Fixed Rate - how to calculate on trade booking?
I am trying to understand how the Fix rate on a OIS trade is calculated at trade initiation. I understand this process for a Fixed V LIBOR trade non collateralized ( discount and projection curve are ...
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Proper Method for pricing Interest rate swaps using dual curves
I am aware that under the dual curve method for pricing standard collateralized fixed floating interest rate swaps, that first a discounting curve should be constructed e.g. OIS Discounting curve, as ...
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Are forward rates for an IRS computed between reset dates or between start dates?
In order to price the floating leg of an IRS I am computing forward rates for future coupons, but I'm not sure whether I have to compute such rates between reset dates or between start dates.
My ...
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Derivation of Swap rate formula
Assuming usual notation, I derive the floating rate and fixed rate payoffs and set them equal. The par swap rate I get thus is:
$$S_{mn}\mid_{t=0} = {\sum_{i=m}^{N-1} \tau_i L(0, T_{i-1}, T_i)Z_{0i} \...
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Duration of forward starting swap
For a spot starting interest rate swap, the duration is calculated as the duration of the fixed rate leg less the duration of the floating leg. Each of these calculations is akin to calculating the ...
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Why are Interest Rate Swaps not valued using Monte Carlo Simulations?
the current valuation methods seem to rely on treating the floating payment as deterministic based on the current yield curve and derived forward rates. But wouldnt it make more sense to use monte ...
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Tenor bucketing for swap interest rates?
in the place I work I've noticed that for asset class Interest Rate Swaps, tenor bucketing takes place. Example as follow:
IRS with maturity 2 month being bucketed into a "3 month tenor bucket"
Page ...
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How to calculate Interest Rate Swap returns
Could someone help me please?
I have calculated the Carry + Roll Down of holding IRS of several countries. My Carry and Roll Down is about 5y IRS, holding it for 3 months: 5y3M.
So, I have the "...
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Eonia swap calculation of floating rate
I'm new to swaps, I've a question about how to calculate the floating rate of an EONIA Swap from market quotation, so that we can keep an eye on the evaluation of our contract Market Value, DV01, etc.....
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LIBOR Curve bootstrapping and compounding
I am currently reading about swap pricing based on using the LIBOR curve to calculate spot rates, forward rates, and discount rates. From what I understand LIBOR is quoted as a simple interest rate ...
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Why is it desirable to receive fixed on a zero coupon swap, and undesirable to pay fixed on a zero coupon swap?
In most established rates markets, swaps are discounted using risk-free reference rates, such as Sonia in the GBP market and Eonia in the EUR market, as opposed to Libor.
Because of the way zero-...
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Basis Swap Dual Curve Calibration
The long end of the Libor swap curve needs to be constructed from Basis Swaps because there are no other instruments traded. Can please someone explain the concept of Dual Curve Calibration?
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Pricing of compounded swaps
As far as I understand, a compounded swap rolls up individual payments into one final payment which becomes:
$$
V(t_n) = N \prod_{i = 0}^{n-1}(1 + d_i L_i)-N
$$
where $d_i$ is the day fraction for ...
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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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Curve building for a swap
I'm a student learning how to build a swap curve, I've deposit 6m rate = 5%, fra 6-12m rate = 5.8% and 12m-18m rate= 6% and swap 2y =7% and 3y swap rate = 7.5%.
I get the correct discount factors for ...
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Is EONIA swap rate really credit risk free?
I have a question linked to the EURIBOR – EONIA spread (or OIS LIBOR spread).
I understand that the EURIBOR - EONIA spread is a credit risk indicator of the interbank market.
There is something I ...
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Swaptions on SONIA/SOFR/ESTR
Given that LIBOR is being decommissioned and we must start building liquidity in swaptions on the OIS swaps, how do we price them? i.e. If I have a swaption on SONIA/SOFR/ESTR etc how does the pricing ...
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Find Interest Rate Swap BUMPs from Bloomberg in Excel
I have a bunch of plain vanilla interest rate swap contracts with all the relevant details regarding payment structure such as notional, fixed rate, index, payment frequency, reset convention, etc.. ...
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Two questions on Interest-Rate Basis Swap compounding
I have 2 questions on Basis Swap compounding and market conventions. These obviously apply where the reset period is shorter than the payment period
Where both fixings have shorter reset period than ...
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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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Carry vs Roll-Down on a zero-coupon IRS
I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
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In a cleared inflation swap agreement, what determines how much "collateral" a party needs to deposit into the third party escrow account?
Does realized inflation or expected future inflation determine how much money needs to be placed into the escrow account each day?
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Interest Rate Swap curve: CMS vs. OIS?
I'm working on a project where we're trying to create a database model where we can (daily) update collected data in order to make RPA predictions.
We received data from Interest Rate Curves called ...
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What happens to both sides of an inflation swap agreement if there is deflation?
If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI?
I.e. does he lose twice?
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What is the difference between a cleared interest rate swap and a OTC interest rate swap with collateral in theory
I understand the aspect that central clearing reduced counterparty risks. From the valuation side, am I right that cash flows for both trades will be discounted at the OIS rate?
The party that holds ...
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