Questions tagged [libor]

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108 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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1answer
85 views

LIBOR Market Model implementation in R

Does anyone know an available LIBOR market model implementation in R? It should not be too sophisticated, as this is a smaller task of a larger work. I am rather thinking about a similar ...
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2answers
65 views

Libor Forwards from Swaps

I am trying to understand how to interpret a few forward curves that I grabbed from Bloomberg. In Bloomberg, you use ICSV command and choose the USD to Libor swap curve. I did this and grabbed the 1mo,...
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1answer
45 views

Negative Libor Simulation

Can LIBOR rates be simulated using short rate models? If no, what is the reason behind it? What is a simple model to simulate LIBOR rates? Especially in a negative rate environment.
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2answers
162 views

From Libor Curve rates to “forward” zero-coupons

I am provided a 6M euribor curve, constructed from FRA's and swaps of tenor 6M on the euro, as well an EONIA curve, constructed from zero-coupons EONIA swaps. Both curves are provided as functions $d\...
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0answers
72 views

Pricing eurodollar futures

How are Eurodollar futures priced in practice? What I already know: The implied 3 Months rate by the futures is 100-price, since it matches the payoff. Using daily LIBOR rates, one should be able to ...
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0answers
45 views

Analyse correlation between LIBOR (quote in yield) and MSCI AC World (in dollars)

How would you analyse the correlation between LIBOR and MXWD? My initial intention was to get the log return of MXWD and take the opposite of the log return of the LIBOR yield (because when yield ...
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0answers
43 views

How is a LIBOR Market Model volatility skew determined?

LIBOR based interest rates are derived from the prices (supply / demand) of swaptions, caps and floors. These prices are generally quoted in yield vols. Their prices are given by the Black formula. ...
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1answer
91 views

Black Scholes- Options and OIS

I have 2 questions. In the Black Scholes formula for currency options, where does forward premium come in? Volatility will be a historic parameter, so which component considers fwd premia. Typically,...
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1answer
1k views

forward vs spot simply-compounded spot interest rate

Question about forward vs spot simply-compounded spot interest rate.Some definitions $P(a,b)$ a zero coupond price at time $a$ and maturity $b$ $L(a,b)$ simply compounded spot interest rate set at ...
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1answer
336 views

IMM Swaps - Accrual & Fixing Schedule

I am wondering how accrual periods & reset dates on Quarterly-IMM swaps are different to normal swaps (in terms of conventions). For example: Normal Swap: ...
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1answer
891 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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3answers
136 views

Can you model the LIBOR rate as a geometric Brownian motion?

i.e. The LIBOR rate is driven in the same way as a stock price in the Black Scholes model. For example let $R_t$ denote the LIBOR rate at time t. the stochastic differential equation (sde) would take ...
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3answers
367 views

Why is there a convexity adjustment if the payment date differs from Libor end date?

A 3 month LIBOR that fixing at $T$, paying in 3 months does not have a convexity adjustment. However, 3 month LIBOR fixing at $T$, paying in 6 months needs a convexity adjustment. How is this shown ...
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1answer
106 views

Libor Market Model Implementation

I'm trying to implement an LMM-MultiCurve for caplet pricing following the analytical formula mentioned in this article (pg 20): https://www.researchgate.net/publication/...
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1answer
622 views

Swap Curve and Forward Libor Rates

How does the (interest rate) swap curve incorporate forward libor expectations?
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1answer
66 views

Why is LIBOR rate smoother than the US treasury rate?

Compare the daily rate graphs of LIBOR and US Treasury bill, the former is a lot smoother than the latter. Is there any reason for this?
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1answer
2k views

Dual Curve Bootstrapping - When to OIS discount?

I am a new quant and I am trying to understand some of the specifics of dual curve bootstrapping. For concreteness, suppose I want to build a Libor forward curve. From what I understand OIS ...
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0answers
32 views

Any Suggestion for Credit Risk Measure for Banking Industry in Turkey?

I need a measure that will proxy for overall credit risk in the banking industry of Turkey. The literature offers LIBOR-OIS spread and Moody's Baa-Aaa spread as strong candidates. However, these ...
2
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1answer
726 views

Why is Overnight LIBOR lower than BoE Base Rate?

According to this site, the current overnight GBP LIBOR is 0.45638%, and the Bank of England base rate is 0.5%. My understanding is that the overnight LIBOR should always be higher than the base rate,...
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1answer
180 views

Dynamics of LIBOR foward rate under T-forward measure

Assume that under the physical measure $\mathbb{P}$ we have for the LIBOR forward rate $L(t):=L(t;S,T) = \frac{1}{T-S}\left(\frac{P(t,S)}{P(t,T)}-1\right)$ that $$ \mathrm{d}L(t) = L(t)\left(\mu(t)\...
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2answers
1k views

For which instruments performs SABR/LMM better than LMM?

For which class of instruments the SABR/LIBOR Market Model does perform better than the classical LIBOR Market Model? The LIBOR Market Model The LIBOR Market Model — also known as Brace, Gatarek, ...
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1answer
75 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
177 views

Floating leg of a standard swap still has a value at par when we use the OIS as discount factor?

Does a bond paying floating coupon LIBOR, still has the value at par when we use the OIS as discount factor? It seems only when ...
2
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1answer
762 views

Total Return Swaps and Borrow Cost Relationship

If an investor is long a Total Return Swap (TRS), they get the total return (ie, including dividend) performance and usually pay LIBOR minus a spread. This spread should trade ...
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2answers
585 views

Properly interpreting LIBOR curves?

I have a confusion regarding LIBOR curves. I understand what LIBOR means, but what exactly is meant by a LIBOR curve? I would imagine a curve where on the x-axis is time and y-axis the 6-month LIBOR ...
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1answer
104 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
249 views

Normal Libor Market Model

Is anybody using normal Libor Market Model (LMM) (as opposed to shifted lognormal LMM)? It could be one of the approaches to dealing with negative rates. If you do, have you encountered any ...
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1answer
187 views

How do I value uncollaterised swaps?

Do I need to discount using the OIS curve? Then add some sort of FVA adjustment over and above the CVA/DVA? How do I work out a banks cost of funding? Any help would be greatly appreciated. ...
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1answer
186 views

Convexity adjustment when payment if after interest natural term?

I've been working with a convexity adjustment for an interest rate payoff and the next question came to me: The usual problem that gives rise to the convexity adjustment I'm referring to is as ...
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1answer
550 views

Change of measure between T-forward and T*-forward contract?

I am trying to prove the need of a convexity adjustment to a forward rate by calculating the next expectation: \begin{align*} P(t_0, T_s)E^{T_s}\big(L(T_s, T_s, T_e) \mid \mathcal{F}_{t_0}\big). \end{...
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0answers
141 views

volatility term structure calibration

As is well known in order to calibrate an interest rate model (i.e. hull-white, LMM) i need to use the current market yield curve and volatility. But in the case I want to calibrate the model in a ...
2
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1answer
983 views

Constructing Swap Curve from LIBOR

Say I'm considering a long maturity fixed rate swap, for instance 20 years paid semi annually. Now I want to find the fixed rate for this hypothetical swap. I understand that this fixed rate is going ...
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1answer
1k 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
2k views

Risk-free: why LIBOR pre-crisis and OIS now

Quick question as a follow-up to this post: why was LIBOR used instead of OIS pre-2007 for the risk-free rate proxy? Please correct me if I am getting this mixed up, but from what I've seen, it ...
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1answer
249 views

Discount curve and payment frequency

In case of uncollateralised trades, where we use LIBOR rates for discounting, does the LIBOR tenor have to match with the payment frequency? For example, one of the swap leg pays USD floating amount ...
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4answers
841 views

Exploding Libor Rates in Libor Market Model

I have implemented the Libor Market Model in Matlab. When I generate a number of paths, I notice that some of them explode. Does anybody have an idea what could cause this? I already tried solving ...
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1answer
6k views

What does it mean to pay USD FRA-OIS?

Would just like to check my understanding. If I were to pay USD FRA-OIS, does it mean I'm paying the OIS leg and receiving fixed? And the fixed is because the 3mL is fixed at the start of the period/...
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1answer
116 views

How are LIBOR rates beyond 12M arrived at? [closed]

I understand LIBOR rates quoted on a daily basis upto 12 M tenors. But how are rates beyond 12M tenor estimated. I got this question from an interviewer.
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1answer
663 views

Is LIBOR a spot rate?

Can we use USD LIBOR as spot rates for discounting? If we have overnight LIBOR and say 1 month LIBOR how to compute 16 day LIBOR? Can we do interpolation?
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1answer
1k views

Define the settlement date of Libor. Where to get them

I am having problems understanding what day is the settlement date for a libor rate, and how to find it for a given rate, e.g., Overnight, 1-Week, etc?
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1answer
450 views

Questions about Markit rates curve bootstrapping

I am reading the following two Markit documents concerning the bootstrapping of respectively the USD rates curve and the EUR, GBP, JPY, CHF, CAD, HKD, SGD, AUD and NZD rates curves. (Both versions are ...
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1answer
171 views

Why change numeraire for the LIBOR Market Model

There are two form of LIBOR Market Model that has a drift introduced. I would like to know in plain english explanation why do practitioners use these changes of measure. Are there any significance to ...
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2answers
6k views

A libor curve VS A 3-month or 6-month libor curve

I'm very confused about the terms regarding libor curves in general. When people talk about libor curve, I picture it as a curve with different libor maturities (i.e. 1 week, 1 month, 3-month and 6-...
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1answer
184 views

Does this trade have a name?

Ok so I got this idea, it's very simple so I know I'm not the only one who has thought about it. It is a pairs trade between long and short term treasury swaps, and goes as follows: Going by ...
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3answers
14k views

Is there an Australian Interbank Rate?

Most widely used Interbank Rates are LIBOR, EURIBOR. Then I read online on SIBOR (Singapore). It says Canda, US are following LIBOR as well. So for Australia, is there a dedicated interbank rate like ...
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3answers
486 views

What does LIBOR really represent?

LIBOR - rate at which banks in LONDON would lend to each other. Is there a similar index for banks in New York (or any other major financial city) would lend to each other? For example, what is the ...
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3answers
823 views

Spread over LIBOR on a Equity Swap

Does anyone how banks determine the spread over LIBOR on a Equity Swap? Example: Party A pays the return on SPTR to Party B Party B pays 1M LIBOR + 40 bps to Party A Does anyone know how the 40 ...
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1answer
195 views

One week LIBOR?

Are there any commonly traded instruments that would allow one to bootstrap a one week LIBOR curve? If not, is there some alternate way to value forward starting swaps with a short first period that ...
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2answers
782 views

6 month curve from 3 month forward rate agreements

Is it possible to bootstrap at least an approximate 6 month LIBOR curve (actually NIBOR, for Norway, in my case) if rates for 3 month FRAs are known? For example, say we know the rates for 1x4, 7x10, ...