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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153 views

How to quickly calculate PV01? Or quickly calculate notional back given PV01 and duration?

is there a way to quickly calculate the PV01 of for example for a swap EUR fix floating 10 years? And is it possible to calculate the Notional, with a given PV01 and the years of the trades or ...
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Quantlib Vanilla Swap Amount not based on Forwards

I have the following code: ...
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How OIS swap rates behave when we receive or pay OIS swap rates?

I am reading a news article regarding how OIS swap rates behave when we receive or pay OIS swap rates. The article states that when we receive OIS swap rates it makes swap rates fall. When we pay swap ...
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63 views

Call probability of a callable swap

For one call date, The call probability is just the probability that the swap rate for the remaining life of the swap is below the strike rate. This is easily obtainable in a normal vol model, it is : ...
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Par rate of Interest Rate Swap

I'm interested in deriving the par rate of an interest rate swap priced under the single curve framework. Let's follow the corresponding Wikipedia article for the sake of notation simplicity. The ...
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What is the maximum yield that can be received from owning an equity?

Suppose I lend you an equity security for ten years, interest-free, and you have to return it to me at the end of term (which means little-to-no risk-taking). What is the maximum (near-)riskless yield ...
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How does one get exposure to stock borrow rates?

Suppose I am long equity borrow rates, but I don't know exactly when borrow will increase. What is the most effective way to trade this? The naive strategy of borrowing the stock now and then lending ...
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2 votes
1 answer
119 views

carry and roll of an asset swap [closed]

I came across many interesting questions regarding carry and roll of swaps, bond futures and bonds. Now I found that link about the carry / roll of an asset swap. Reading that article two questions ...
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Convexity adjustment doubt

So this the question and the answer to the first one states that only the 5 year swap rate will be adjusted for convexity and the answer to the second one states that neither of the rates will be ...
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1 answer
282 views

STIR Topics: XCCY pricing and trilemma between SOFR, FF & FRA

Question on STIR. Suppose we sell a 3m JPY swap with spot start date, and we are able to back out the 3m implied JPY forward points (hence swap points), using 3m JPY OIS (3m TONA) and 3m USD OIS (3m ...
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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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139 views

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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1 vote
1 answer
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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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2 answers
187 views

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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1 answer
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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?
2 votes
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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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1 answer
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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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1 answer
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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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2 votes
3 answers
303 views

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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1 answer
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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 ...
1 vote
1 answer
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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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1 answer
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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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1 vote
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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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2 votes
2 answers
254 views

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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1 answer
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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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2 votes
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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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2 answers
191 views

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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1 answer
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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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2 votes
1 answer
446 views

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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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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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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2 votes
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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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4 votes
0 answers
117 views

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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2 votes
1 answer
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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 ...
3 votes
1 answer
3k views

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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