Questions tagged [interest-rates]

An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor).

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I am wondering if there are any approximations that exist to convert yield vol to price vol? I am dealing options on SOFR futures, which can be quoted in yield and price (i.e. 3% put and $97 call are ... 0 votes 0 answers 16 views Barrier Reverse Convertible on interest rate I'm trying to find the price of an barrier reverse convertible on interest rate - https://structuredproducts-ch.leonteq.com/isin/CH1251797945. I have simulated the underlying interest rate by Vasicek ... 0 votes 0 answers 52 views Fitting volatility using SABR I have been working on generating a volatility surface for options on SOFR futures with the help of the SABR model. I am running into some trouble for low strikes in particular, in that I cannot seem ... 1 vote 0 answers 21 views I am trying to compute the the tail of a future roll using the ratio of forward dv01 I am trying to compute the the tail of a future roll using the ratio of forward dv01, per the link CME: Calendar Spreads with Tails : I am trying to compute the the tail of a future roll using the ... • 11 0 votes 0 answers 34 views Vasicek model calibration to bond prices or rates (no swaptions) I need to calibrate Vasicek's model$dr_{t} = a(\theta - r_{t})dt + \sigma dW_{t}$in a market with no swaptions. I was thinking in estimating$\sigma$with historic data, but I'm in the doubt with ... 1 vote 0 answers 114 views Determining the floating rate for an interest rate swap I'm trying to price an Euribor 6M Swap and comparing this to Bloomberg's swap manager. However, I'm having some doubts on my implementation of getting the reset rate for the floating leg. In Bloomberg ... 0 votes 0 answers 65 views Lend$ synthetically at higher yield using ¥: it works but why?

The Trade is: You have USD 100m funding Swap USD for YEN equivalent at today's spot, agree to swap back in 12 months at the USD/JPY forward rate With the YEN buy a 12 months Japanese Government bond ...
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Quantlib FRA and interpolated rate in Swaps vs BBG valuation

I am building a CZK swap pricer on quantlib, and I am trying to understand my differences with Bloomberg pricing. I believe the way I set up my FRA is wrong, the reason is because even though I match ...
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How to convert the parameters of multi-factors cheyette model (quasi-Gaussian model) from tenors to factors?

The book "Interest Rate Modeling" by Andersen and Piterbarg is an extermely fascinating book on interest rate derivatives. Recently, I have encoutered some issues while reading this book. ...
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Quantlib - mismatch with BBG Swap

I'm trying to price a CZK swap via Quantlib with BBG data, so far nothing complicated but I can't seem to match the floating leg cashflows, and NPV, when I price my swaps, even if I find the right Par ...
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Are there any structural reasons for choosing constant forward rate interpolation over linear interpolation beyond just simplicity?

I've been looking into rate curve interpolation methods and focussing on two basic ones - linear interpolation, and constant forward rate interpolation. In the first one, given a rate curve consisting ...
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PV01: bumping all tenors along the curve or only a tenor at a time?

Item 22 from this ISDA SIMM 2.3 document gives the following definition for the PV01 of an instrument $i$ with respect to the tenor $t$: $$s(i, r_t) = V_i(r_t+1bp, cs_t) - V_i(r_t, cs_t)$$ where $r_t$ ...
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Interpolating FRA curves for MPC dates

I have data for all the "white" FRAs with 3m fixings in a given market, i.e., 1x4 up to 9x12 and all the central back MPC meeting dates over the next twelve months. What is the recommended ...
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CMS diffusive dynamic

As I am landing on a project related to CMS option, I am wondering if one can write dynamic for CMS depending on the pricing model. For example, is it possible to have a diffusive dynamic for the CMS ...
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Trinomial lattice model movement probability calculation under various models

I need to construct trinomial lattice model movement probability calculation under various models Vasicek, Hull White, Ho Lee and Hull White Two Factor. I do not see any reference to these models with ...
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Deriving central bank hikes/cuts from a swap curve

Can you please explain the following? Please assume I am 5 years old. how do you derive the cuts/hikes of the policy rate priced in a swap curve? why you can derive the cuts/hikes only from a swap ...
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Pricing a callable bond in a minimal way

I am looking for a minimal way to price callable bond from a defaultable issuer. The idea is to assume that we are in a deterministic world (i.e no volatility). I tried a methodology but I am not sure ...
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Bootstrapping overnight SOFR rates from futures

I'm struggling with the best way to approach bootstrapping out a SOFR curve using SOFR 1m and 3m futures. Theoretically, unless I'm wrong, there should be a way to price out the expected overnight ...
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Effect on Forward Swap Rate from a parallel shift in forward curve

Can anything be said on how a parallel shift in the forward curve affects the forward swap curve? To be more concise, say we have a model estimate of the implied vol for the 2Y-10Y point (2Y ...
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Kalman Filtering to estimate parameters of G2++ Model

I'm trying to use Kalman Filtering to estimate the parameters of the G2++ short rate model. For this, I've been using Implementing Short Rate Models: A Practical Guide by F.C. Park. For reference, he ...
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FRTB Delta CSR vs Delta GIRR

In Basel III, FRTB SA includes different market risk capital requirements for interest rate (GIRR §21.19) and credit spread risk (CSR §21.20) exposures. These are different risks, as credit spreads ...
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Why do exchanges apply a fixed interest rate as part of the funding rate for perpetual futures?

Some exchanges, such as Binance, charge a fixed interest rate as part of the funding rate. Having longs pay shorts doesn't quite make sense to me because it causes spot to trade rich to perpetuals ...