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Questions tagged [libor]

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1answer
474 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{...
1
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1answer
163 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 ...
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1answer
5k 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
750 views

LIBOR rates from Vasicek/Hull-White model?

I am somehow puzzled by the following problem: LIBOR rates are forward rates for an interbank loan for 1M or 3M (let's limit the range of possibilities to these two cases). Assuming that I have ...
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0answers
44 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 ...
1
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1answer
396 views

LIBOR 3M and 1M from Vasicek model

I would like to discuss my approach toward modelling of interest rates with respect to its downsides and advantages. My problem is to forecast daily LIBOR 3M and LIBOR 1M over a particular time ...
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1answer
65 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
607 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
225 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 ...
0
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1answer
153 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
425 views

AUD Swap Reference Rate?

So I understand that BBSW is the reference rate used in AUD swap transactions since AUD LIBOR has been discontinued. If I want to build a curve out of the reference rates used to price AUD swaps, I ...
0
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1answer
5k 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 ...
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1answer
89 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
73 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 ...
0
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1answer
92 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
995 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
114 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
63 views

Relation between Libor market model and Black76 with time-dependent vola

The Black76 model uses a lognormal process to model the forward rate $L_1(t)$ from $T_1$ to $T_2$ at time $t$, $$dL_1(t) \ = \ \mu(t) L_1(t) dt + \sigma(t) L_1(t) dW_t$$ By switching to the $T_2$-...
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1answer
1k views

How to calculate fair 3s1s basis levels

How would one calculate the fair level of 3s1s single currency basis swaps using simply the 1m & 3m libors and ois levels? (so you have fra-ois spread levels in both) I understand that as the FRA-...
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1answer
234 views

Show that being Long a caplet & short floorlet (both with strike price K) is equivalent to a FRA where you pay the fixed rate K

How do you show that being long a caplet and short a floorlet (both with strike K) is equivalent to a Forward Rate Agreement where you pay the fixed rate K?
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1answer
3k views

What is the difference between BBSW and AUD LIBOR?

I understand that BBSW is the reference rate for financial instruments while AUD LIBOR is the interbank rate benchmark. However, since AUD LIBOR has been discontinued due to the rigging scandal, can ...
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0answers
31 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
113 views

Test Log-Normality for LIBOR forward rates under the Libor Market Model

As far as I understand, under the Libor Market Model the forward rates are assumed to have a log-normal distribution. Given that I have constructed my LMM model and now have a matrix of: k different ...
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0answers
92 views

How to prove following order?

Consider a consol bond, i.e. a bond which will forever pay one unit of cash at $t = 1, 2, . . ..$ Suppose that the market yield $ y$ is constant for all maturities. (a) Compute the price, at $t = 0$, ...
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1answer
515 views

Swap Curve and Forward Libor Rates

How does the (interest rate) swap curve incorporate forward libor expectations?
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1answer
167 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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1answer
432 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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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?