Questions tagged [libor]
LIBOR was the London Inter-Bank Offered Rate. It has been replaced by The SOFR (Secured Overnight Financing Rate).
28
questions
8
votes
2
answers
1k
views
Is SOFR to replace LIBOR or Fed Fund Rate or both
I am a bit confused on what is going on regarding the new benchmark rate SOFR. My understanding is that SOFR is to replace Libor. However, I also get information on Fed fund OIS discounting is ...
- 736
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).
...
-1
votes
1
answer
334
views
How to value a long term interest rate swap if the floating leg is USD-LIBOR
To value an IRS, you require a spot/zero curve. If I am correct this zero curve will be the USD-LIBOR curve. However, if you have e.g. a 10-year swap that you are trying to value 2 months into the ...
- 39
9
votes
1
answer
432
views
What is the market standard for IR option pricing when moving to SOFR
From books it looks like market standards to price IR options, like swaptions, are SABR, LMM or mix of the two (SABR-LMM).
But LMM models the forward LIBOR rate. What will happen to it once LIBOR ...
- 113
8
votes
3
answers
3k
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 ...
5
votes
1
answer
7k
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 ...
- 115
5
votes
3
answers
566
views
Curve building dates overlapping impact on discount factor
I'm building a short end of the libor curve using deposit & fra due to overlapping in dates I get wrong values of Discount factor, here's the data i'm working with:
My today date is : 23/10/2019 ...
- 616
3
votes
1
answer
251
views
Compare equity option volatility under SOFR vs LIBOR
We know that after the big bang from LIBOR to SOFR, LIBOR will eventually disappear.
This brings up one question that I do not have a clue to answer: How to evaluate derivative in a consistent manner ...
user40979
2
votes
3
answers
2k
views
TED Spread Replacement?
Will replacing the 3-month tenor of the US LIBOR with SOFR or CME 3-Month SOFR Futures work as well as an indicator of credit risk?
I have my doubts given:
SOFR reflects secured lending
LIBOR is ...
- 123
15
votes
2
answers
2k
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, ...
- 251
10
votes
3
answers
985
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
9
votes
1
answer
3k
views
Where do swap rates and/or long-term forward rates come from?
I apologize if this is supposed to be obvious, but ... . Libor spot rates are quoted up to a year, beyond that one can use Eurodollar futures to continue to build the curve. Let's say up to 3 years. ...
- 623
8
votes
2
answers
1k
views
Why is USD LIBOR used for USD denominated securities?
I am just starting on Interest Rate Swaps & curve construction. While reading few materials on Interest Rate Swap, it's indicated for e.g. "Floating Coupon Index: 6 month USD LIBOR".
LIBOR is ...
- 523
6
votes
1
answer
433
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 ...
- 71
4
votes
3
answers
1k
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{...
- 282
3
votes
1
answer
3k
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,...
- 33
3
votes
2
answers
799
views
OIS rate to build Term structure
There are some discussions (e.g. Difference between OIS Rate and Fed Funds Rate) on usage of OIS rate to build the Libor term ...
- 357
3
votes
2
answers
357
views
2 Ways to Define/Calculate "FVA"? - Same or Different? (Simple XVA Question)
I've got a very simple question on 2 different ways of defining or calculating the FVA of an uncollateralized swap.
One definition I've often seen is that the FVA is the difference in the net present ...
- 31
3
votes
1
answer
547
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 ...
- 282
2
votes
0
answers
105
views
How do forward-looking forward rates in the Mercurio's and Lyashenko's normal or extended FMM model represent EURIBOR rates
(By XIBOR I intend any EURIBOR or LIBOR rate. By RFR I intend SOFR for the USD and ESTR (€STR) for EUR.)
I am mainly focused on the EUR rates market (but also a bit on the USD market) and looking for ...
- 1,223
2
votes
1
answer
1k
views
LIBOR Quoting Conventions
I have been trying to build a NSS parameterization of LIBOR term structure, and have confused myself over how all the dates are dealt with.
On https://www.theice.com/publicdocs/futures/...
- 23
2
votes
1
answer
147
views
Can you shift a standard libor market model with regard to only at-the-money options?
Suppose I have an LMM defined using the spot measure as in Brigo and Mercurio:
$dF_k(t) = \sigma_k(t)F_k(t)\sum^k_{j=\beta(t)}\frac{\tau_j\rho_{j,k}\sigma_j(t)F_j{t}}{1+\tau_jF_k(t)}dt + \sigma_k(t)...
- 123
2
votes
1
answer
1k
views
DV01 on LIBOR vs. SOFR basis Swaps
If I had entered into a USD 10mn pay SOFR, receive 3M LIBOR swap with a 5yr maturity, I would have had a positive NPV of about 80k by the beginning of March due to the massive drop in SOFR (1.55 to 0....
- 23
2
votes
1
answer
2k
views
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, ...
- 21
1
vote
2
answers
4k
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 ...
- 166
1
vote
1
answer
9k
views
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 ...
- 231
0
votes
1
answer
527
views
Constructing a USD LIBOR curve
USD_LIBOR rates are only published up to 12 months.
how would you approach constructing the curve to at least a 30-year tenor, to price for example an interest rate swap.
I have heard that swaps can ...
- 39
-3
votes
1
answer
2k
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?
- 97