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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IR Swaps - Curve sensitivity at maturity node
I was recently trying to price some IR swaps in BBG. I noticed that when I shock the yield curve up by 1bps at a single specific node, the DV01 is close to zero except at the node nearest the maturity....
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Calculating Implied Forward Rates from Eurodollar Futures Quotes
I'm trying to calculate the implied forward rates of the Eurodollar (USD) curve, knowing that the Eurodollar curve is supposed to be a mirror of the yield curve (else arb).
I have this formula for ...
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What is the correct convexity adjustment for an Interest Rate Swap with unnatural reset lag?
I am looking at the valuation of an Interest Rate Swap (IRS thereafter) which is pretty much vanilla with one small tweak. Floating leg pays 3 months LIBOR in monthly intervals. To be precise: ...
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Difference between OIS Rate and Fed Funds Rate
I understand Fed Funds Rate is the rate at which banks lend/borrow to/from each other to maintain their daily reserve requirements at the Central Bank; also it is unsecured-meaning no collateral.
Is ...
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Measuring Medium-term Inflation expectations and real interest rate from OIS and Inflation Swaps
In this speech by Mario Draghi, in section '2:Responding to high unemployment', and subsection 'Boosting aggregate demand', Mario states «Over the month of August financial markets have indicated that ...
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Calculating the value of an interest rate swap
Calculate the value of an interest rate swap with these features:
Notional $100M
Pay: 3.5% semi-annually
Receive: BBSW semi-annually
Term: 3 years
Assume the BBSW curve is as presented here:
I ...
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Compute I-spread from ASW-spread (or vice versa)
The I-spread ("mid swap spread" or yield-yield spread) is a standlone measure of credit risk, a security against matched maturity vanilla swap rate. Consider a package in which the investor receives ...
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Starting short-end OIS zero curve building
I understand the concept of bootstrapping and building the curve when we have the values for first few maturities. However, I can't quite get how the initial values for zero curve rates are derived ...
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Determining discount factors for non-standard maturities
Let's say we'd like to find a par rate for a 1 month forward starting 20-year interest rate swap. In this case, we'd need to discount cash flows for the payment periods shifted +1 month from standard ...
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forward space vs zero space in finance jargon
Would anyone know what does it mean to value an asset in "forward space" versus "zero space" ?
where does one start from when trying to dig into the meaning of this?
Thanks in advance.
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Swaption Corridor Payoff Diagram
What does the payoff diagram look like for a long payer swaption corridor?
For example, suppose that I am looking at a long-payer $1 \times 10$-year swaption with 10Y swaps as the underlying. If I ...
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How to choose the correct ticker for rates?
I would like to calculate funding liquidity following Asness/Moskowitz/Pedersen (2013). Among others, they calculate the LIBOR minus term repo rate, and the Swap-T-bill, LIBOR minus interest rate ...
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What is the difference between OIS Swap vs Basis Swap?
What is the use of OIS Swap Curve vs. Basis Swap Curve?
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US Treasury interest rate swaps
I know that Bloomberg will give me the swap rates for Treasury 30's-5's, but I don't have a Bloomberg. Can anyone direct me to a source?
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How to build a cross currency swap pricer?
We're looking to build a pricer to convert a funding spread in a given currency over a specific funding basis e.g. 20 bps EUR 3m€ and convert it to a funding spread to a different currency with a ...
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Pricing of Interest rate swap with start ex. 01/06/2015 to 03/06/2015 - 2 extra days? Change discount factor and fixed payments?
I hope you can help me.
So let say we have an interest rate swap, with the following characteristic:
Start in 30/06/2015.
End in 02/07/2019
It has fixed payment every year, and floating every ...
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How to run swapbyzero matlab function in a loop [closed]
I made a for loop in Matlab in which I price a swap by using the swapbyzero function. The swapbyzero function requires a rates structure created by using the intenvset function from matlab. The ...
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Cross Currency Swap
1) What is the difference between Cross Currency Swap and Cross Currency Basis Swap? Appreciate if this can be explained in layman's terms.
2) Could you advise me which swap rate to be used for the ...
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Why can a swap option be regarded as a type of Bond option?
Why can a swap option be regarded as a type of bond option?
My idea: Suppose the swap rate of the swaption is $s$. Now consider a bond option expiring at $T$ with strike, $(P_K)_t = \dfrac{1}{1+s(T-...
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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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Parametric VaR of a portfolio including a swap
I am calcualting the parametric VaR of a portfolio that includes among other things an IRS swap that begins in the exact same day the valuation is done. Therefore, its NPV is 0 and I do not which ...
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Price compounding: Swap versus Governments Bonds
There are different rates curve to compound prices. Since the crisis, regulators tends to favor price compounding with swap curves over IR curves deduced from governments bonds (EU regulators, french ...
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Swap curve and short maturities
Consider USD Libor 3M swap curve. There are different maturities:
2d, 1m, 3m, 6m, 9m, 1y, 18m etc.
The values for 3m, 6m, 9m etc. time buckets are just swap rates for swaps with floating leg equal ...
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ACT/360 day convention in swap pricing
The floating leg of a USD swap has present value
$$
PV = \sum_{i=1}^N \delta_i f_i p^d(t_i)
$$
where the $\{t_i\}$ are the floating leg payment dates, $\delta_i$ is the accrual fraction between $t_{...
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Reset Date standard for ICP (Indice Camara Promedio) trade
What is the Reset Date standard for ICP (Indice Camara Promedio) trade? Trade Currencies are USD v/s CLP. Please provide the ISDA link if there are any amendments to ISDA standards.
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By swap valuation, is accrued interest calculated?
If I treat the 2 legs as bonds, and I want to calculate the present value somewhere between 2 payment date, should I calculate accrued interest?
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Swap rate calculation if reference rate differs from risk free rates
I want to find a swap rate, for an IRS where the floating is Libor+x bp where x is a constant. I have a risk free curve which is not the libor curve. I also have the libor rates.
How can I calculate ...
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Why is there an upper limit on the premium of an ATM (!) call swaption in the Black76 model?
Trying to imply Black76 (where the forward swap rate is log-normal) volatilities as Bloomberg does in their VCUB screen we see holes at two regions:
at short maturities due to negative rates which ...
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Is the value of fixed swap leg independent of X, where the Floating Rate is say, LIBOR minus X%?
In my texts of swap valuation, the fixed leg is decided by calculating the following equation, say for a swap agreement where:
Fixed Leg : $s(1)=s(t)$
Floating Leg : 1 year LIBOR - 25bps
Term = 2 ...
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What is the difference between par delta and zero delta?
I was looking at different methods of calculating delta for Interest Rate Swaps(IRS) and came across the words par delta and zero delta.
I am not sure of the difference between the both and when to ...
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Valuation of option on amortized IR swap
I'm currently valuing swaptions using an implied volatility surface and Black's formula. This formula is given by
$$A (S\Phi(d_+) - K \Phi(d_-))$$
where
$$ d_{\pm} = \frac{\log\left(S/K\right) \pm \...
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One Way CSA Agreements
This is probably an older topic but I don't seem to find any related threads on this forum.
What is the best way to value, let's say, a vanilla IR swap (you receive fixed) that you trade against a ...
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Swaption on a swap with 0 year tenor
Any ideas on valuation of IRS swaption on a swap with 0 year tenor?
As an example, we have a 5 year swaption, on expiration it is cash settled; the underlying swap tenor is 0 years with excercise and ...
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What is mathematically rigorous way to estimate floating swap cash flow in the future?
In vanilla swap, the FL payments is fixed on one date and paid on the next reset date. So the next payment is known. However, the payment after that is not known. What would be the best estimate of ...
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If floating leg in an arrears swap is paid on the date then valuing them is like predicting future
From what I am reading arrears swap are paid on the same day(actually, +2 business days for JPY and USD) as the reset date. To me then, a week before the reset date the floating rate is not known. ...
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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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Something is wrong with my MtM calculation
I'm trying to value a super simple receiver swap immediately after the first swap settlement (1 year in).
The given answer is -1.91 million to the floating rate payer, but I am not coming up with ...
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Immunization: Whats the best way to hedge my short interest rate exposure?
What's the best way to hedge a portfolio against a rise in rates?
Portfolio: long bonds different maturities.
a) parallel shift
b) convex shift (short and long term rise more than mid term)
How is ...
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Derive OIS rate from IRS rate and Fed Funds/Libor basis spread
For example I have 7Y interest rate swap rate and 7Y Fed funds/Libor basis spread. What is the step-by-step procedure to derive OIS rate from these two?
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Why using the swap curve as riskfree rate and no longer gov bonds?
I recently had an interview where I was asked what to use as risk-free rate. In all my textbooks it was always the US treasury yield curve.
But they said no its now the "swap curve".
Why is the swap ...
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what data to use to compare the interest rate among different currencies?
Very new to fixed income signals. I am a little confused about which data to use to compare interest rate among different currencies.
For example, I am interested in compare interest rate in the ...
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How to optimally hedge construction loans with interest rate swaps?
We are a borrower with a construction loan that is pay floating. At the inception of the loan, we entered into a pay-fixed/receive-floating interest rate swap with a growing notional profile that ...
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Stub rate and first fixing in IRS
I have 2 questions that probably are related.
Suppose there is an IRS that pays a 2% fixed rate every 6 months and receives the Libor 3 months (but paid every 6 months).
The swap starts today (March ...
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Does an Interest Rate Swap has a Vega component?
I am a bit confused on how you calculate vega for Interest Rate Swap.
One argument is that IR Swap is a combination of fixed rate bond and floating rate bond. Since a bond has no vega component, IR ...
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Forecast 3m LIBOR USD. Budget purpose
How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years?
I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
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Bootstrapping zero-rates from AUD swap rates
I have a pay fixed / receive floating interest-rate-swap on the AUD BBSY that I'd like to price for the purposes of accounting.
I understand the general process to be as follows (assuming single-...
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