Questions tagged [swaps]

Swaps are a common name for exchange operations between two (or more) counter-parties with various financial instruments like cashflows (IRS), currency (XCCY), credit risk (CDS), et cetera

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Approximate dollar MTM of interest rate swaps

I'm definitely a fixed income tourist but I'm wondering if there's an easy way to back of the envelope approximate dollar PnL of an interest rate swap For example, if I enter a $1m fixed 5y USD swap ...
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Quantlib: VanillaSwap not using underlying Index fixings correctly

I am trying to reperform a vanilla swap. The problem is that the vanilla swap object does not seem to be using the exact fixings of the underlying index. ...
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The Actual Cash Flow of FX Swap (ON,TN)

I wonder like to check whether my understanding of fx swap with TN/1W is correct and know more about the market convention, ON Swap and intuitive way to understand fwd pt. USDCNH Spot: 6.65, ON ...
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Is a swap fixed rate always a par yield?

I am learning about using the OIS fixed rate to value a plain vanilla LIBOR swap. I'm using Bond Math by Smith, and the accompanying online addendum. To bootstrap the discount factors, the author ...
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FX Swap PnL and NPV

Suppose I have an existing FX Swap, suppose the spot leg is already settled, so only forward leg is left. Question: What will be the P&L for this instrument - only forward leg NPV or spot leg is ...
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Returns of an interest rate swap

I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate ...
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Currency swap deals between countries

Amidst bankruptcy situation in Sri-lanka, India is said to have come to rescue Sri-lanka, and entered into a currency swap deal as referenced here - https://www.cbsl.gov.lk/en/news/cbsl-enters-into-...
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Why is the formula for the 5y5y inflation swap forward on bloomberg 2*USSWIT10 Curncy-USSWIT5 Curncy

If USSWIT10 Curncy is the expected average inflation for ten years and the USSWIT5 Curncy is the expected average inflation for five years, I don't know why that formula would tell me what the ...
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Does quantlib support Equity/Index Swap valuations?

Is there a way to create a Leg in quantlib in which the notional and reset amounts are calculated by how an index/equity performs?
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How Bloomberg calculates discount rates for zero rate curves?

I would like to ask about discount rates calculation algorithm by Bloomberg terminal. In the image above is possible to notice the discount rate for each term. The short end, instruments from 1 DY up ...
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How to value plain vanilla IRS as portfolio of 2 bonds?

Good afternoon! I am reading a chapter in Hull's textbook about plain vanilla interest rate swaps. He provides example of pricing plain vanilla swap as a portfolio of floating-rate bond and fixed-rate ...
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Interest rate swap key rate duration

I'm just looking for an intuitive grasp of a 10y swap's key rate duration is almost all at the 10y point and not more evenly distributed across the curve. It makes sense for a 10y bond as there is a ...
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Can I Delta hedge Swaption with 1month option expiry on 10 year swap as 1 month forward starting swap (expiry 10 yr) & notional as Delta% of swaption [closed]

Whether below is correct 1 month expiry of swaption with 10 year swap underlying can be delta hedged as with below swap: Notional of swap = delta% of swaption multiplied by notional of swaption As of ...
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SONIA Reference Data Calculation / OIS Data

I am reading material reference rates calculation for SONIA by refinitiv. It says the data is calculated based on OIS Rates between 10:50AM and 11:00 AM. https://www.refinitiv.com/content/dam/...
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Day count convention effect on I-spread / Z-spread

I would like to ask if the Ispread / Zspread are computed correctly when day count convention "DCC" of the swap rate is different from the DCC of the bond. My understanding is that DCC plays ...
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Why is the fixed leg of a libor swap 30/360 and the floating is actual/360?

I have been looking at the following post (and comparing it to SWPM in Bloomberg) https://kiandlee.blogspot.com/2021/07/interest-rate-swap-pricing-using-r.html Why does the fixed leg accrue in 30/360 ...
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Attribute P&L to PCA vectors (swaps)

I have a daily US swaps data here for 2020 https://easyupload.io/yh4rnd . I have run PCA on standardized data and got PCA matrix (and basic statistics): I also have such hypothetical portfolio that ...
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"The five year swap has the same dv01 as a par five year treasury bond" Why?

Am reading a book (The Complete Practitioner's Guide to the Bond Market by Steven Dym, 2009) where the author gives an example of someone buying a 5 year par 4.65% treasury and someone else entering ...
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QuantLib Python: how to retrieve the Yield Term Structures connected to a VanillaSwap Object

For pricing a fix vs. float swap in QuantLib Python two YieldTermStructure Objects are necessary: one for forward rate estimation connected to a FloatingRateIndex Object, and one for discounting the ...
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No. of payments in 15/18/21 month ESTR OIS

I want to construct a zero-curve from EUR OIS rates (IR swaps with ESTR as the floating rate). For bootstrapping, some of the contracts I use have maturities of 15, 18 and 21 months (RIC: EUREST15M= ...
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If everyone wanted to sell swaps, why does that drive swap rates down?

If everyone wanted to sell swaps (pay fixed, receive floating) why does that drive down swap rates? Wouldn't that raise rates because in order to compete with each other they would have offer to pay ...
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Floating swap payoff with rate determined on current instead of previous date

I am attempting to determine the payoffs a modified swap, in which the floating payments at a time $T_k$ are made on the current date (i.e. $L(T_k,T_{k+1})\equiv L_{k+1}(T_k)$) rather than at the ...
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How to price OTC swaps to hedge non-economic cashflow variability

Suppose we have a stochastic cashflow $X_t$ from a portfolio of contracts with clients. We can simulate from $X_t$ and can calculate $E[X_t], \forall t \in [1,n]$ where $n$ represents the longest ...
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How do I calculate yield and trading margin of an Australian Dollar floating rate note?

I am trying to calculate the yield and trading margin on an AUD FRN in a robust manner. I am hoping someone can help with a few details. I am forecasting cash flows and solving for the discount rate ...
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Quantlib : Valuation of inflation swaps of EUR-RPI using quantlib python?

Below is the sample code to compute the inflation swaps. I have referred the Quantlib cookbook to get the flavor of Inflation swaps. But I feel that the term structure and final NPV is not accurate ...
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How does the market derive market implied rates hike via swaps?

It is the story of interest at the moment. Rate hike expectations from central banks around the globe. Various sale side research parties publish often market implied rates hike. The magnitude and the ...
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Historic Fixing rates for swaps

Why would I need historic fixing rates for swaps started in past?. If trade is started in past say 2 yr back and rate is fixed 3 mth back then I only need this known rate to calculate price right but ...
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Annualizing the pay frequency of underlying swaps when bootstrapping the zero curve?

Say I'm looking to bootstrap two zero curves based on two swap curves with different underlying currencies and, consequently, two different pay structures in the swap contracts. For example, say I ...
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Connection PV of a swap's floating leg and principal amount of coupon bond

I am currently practicing for a Fixed Income exam but got a little bit confused with a question. The first part asks me to talk about the connection of the PV of the spotstarting floating leg of a ...
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Bermudan Swaption Pricing via Least-Square Monte Carlo

I have some confusion regarding pricing a Bermudan Swaption using LSMC. Let's say the underlying swap has payment dates $T_0 < T_1 < \ldots < T_n$ and for simplicity, assuming the exercise ...
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Filtered Historical Simulation VaR for swaps

I am trying to understand how to calculate FHS VaR for a portofolio of vanilla swaps. I think I understand the main ideas behind FHS VaR and how to implement it for other assets such as equities. I ...
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Bootstrapping discount and forward curve (using ESRA) and price a vanilla swap

I am just starting to use Quantlib, and want to try and replicate the SWPM-functionality in Bloomberg, and price a vanilla 5Y EUR OIS. Below is the overall swap data used in BBG: Overall settings ...
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How the swap curve moves if fed fund rate decrease?

I am currently reading the book "Interest Rate Swap and other Derivatives by Howard Corb", in Chapter 8.2 Curve Trades, it mentioned: "Investors believes Fed is going to lowering the ...
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How to compute IRS DV01?

Assume 50k notional and annual payments, entering a long position in a 5y interest rate swap will pay 50k * fixed rate (i.e. predetermined 5y swap rate which makes PV equal to zero) and receive 50k * ...
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2 votes
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Compounding arrear SOFR Forward rate/curve

As per ISDA protocol and supplements, they stated that the fallback rate to be used on legacy derivative contracts is the compounding in arrears SOFR rate (based on a 2-day backshift) + a fixed spread ...
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Specify fixing days for floating leg in Interest Rate Swap valuation using QuantLib Python

I am trying to price an Interest Rate Swap using QuantLib Python, and everything seems to be fine. However, I can't seem to understand where I can specify the number of fixing days. Below are my codes....
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What is the correct way to build a full swaps curve using discount factor interpolation?

I want to keep this as high-level as possible so that the rest can be figured out, but we will use DF log-cubic interpolation. (Convert rates curve to discount factor curve, interpolate this using log-...
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Estimating SOFR daily rate from a given curve

Goodday. May i know how can i estimate those fixing rate in the yellow cell, with the curve given on the left? Would my step below work 1.perform linear interpolation to find the rate e.g. the fixing ...
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Potential risks Trade Idea

I came up with a trade idea that wins when Interest rates increase. I am playing that by buying a Payer Swap and selling a deep ITM Receiver swaption at ATM+60 (same notional). I chose that strategy ...
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Which curves to use for different swaps?

How do we determine which curve to use for pricing different swaps, for e.g. I don't understand how following come: Interest Rate Swap (USD) Fixed: USD Treasury Floating: none CCS (USDINR) Fixed: ...
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Swap spreads behaviour before Treasury auctions

Not really a quant question but why would someone buy us swap spreads before a US treasury auction. I get the idea of bidding for the bonds and then using the swap leg to asw the bond but whats the ...
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Why exchange basis exist in swaps

For example, swaps traded in CME versus LCH are quoted with slight difference? how do we decide the theoretical boundary of the basis ? what factors need to be consider? I think the principal to ...
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How to calculate net exposure on a Interest Rate Swap (and on derivatives in General)?

I would like to know how to measure Exposure on swaps (IRS, TRS...) in general . Example, if a party A has a OTC position of 100 million USD in IRS with party B, is party A exposure = 100 million ...
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Why has cross currency basis become higher since the 2008 crisis?

The impact of cross currency basis on FX forward pricing has become more noticeable since 2008, diverging significantly from the interest rate differential, what are the fundamentals behind this ...
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Difference between 5Y breakeven inflation and 5Y5Y inflation forward?

I cannot figure out the difference between the two data series found here: https://fred.stlouisfed.org/series/T5YIE/ https://fred.stlouisfed.org/series/T5YIFR/ The 5Y breakeven inflation, to my ...
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Plotting a CSA curve in QuantLib

IRS under a CSA Let's consider an example of Interest Rate Swap under a CSA. To calculate discount factors that can be used to discount cashflows in one currency, $C_{1}$, collateralized in another ...
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Compute forward swap rate from spot swap rate?

I am pretty new to interest rate swap and this question might sound silly. Why does 3y2y (3yr forward and 2yr tenor) swap rate roughly equal to (5*5y swap - 3*3y swap) / (5-3)? Any explanation would ...
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How to compute NPV of Latin American swap CLP-TNA (chilean) using quantlib?

I am trying to value the Latin Americans swaps. But CLP-TNA valuation is far off from the actual valuation. Please suggest, what I am missing in below methodology to compute NPV. ...
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How to compute the Brazilian Plain vanilla swap using Quantlib?

How to compute the BRL plain vanilla swap. I have followed the below methodology to calculate the valuation for other indexes but BRL-CDI is far off from actual valuation. Please suggest if anything ...
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IRS: Diff between "pricing curve" and "discounting curve"

I'm reading a book on swaps and author mentions in the typical attributes of swaps: "Discount curve: For present-value calculations (say, to calculate the current market value of the swap), what ...
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