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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55 views

Swaption decomposition - forward options and option on options

I am following through the book "An Introduction to Financial Derivatives" by Salih Neftci. According to the book, a swap can be decomposed into cash flows from forwards and options. I am ...
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Using Quantlib to pricing a FR007 swap (which is compounding interest rate in floating leg)

You can treat the FR007 swap like this: The fixed-rate leg is the same as the fixed-rate leg of the LIBOR swap. The floating rate can be treated as the combination of some 3-months maturity compound ...
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What is the market convention for the stub floating payment on a vanilla swap?

Let's say I have a plain vanilla "broken date" swap (Annual fixed, 6m float) that I enter into today (10th Nov 20 for settle T+2, 12th Nov 20) and which ends on 16th August 2023. The swap is ...
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Do all inflation swaps reference the non-seasonally-adjusted index values?

Inflation CPI values (typically published monthly except Australia) are typically published in both SA (sseaonally adjusted) and NSA (non-seasonally adjusted) variants. Inflation swaps reference the ...
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Question on Xccy swaps curve observability

Trying to get a sense of the following ... In some emerging markets such as Argentina, there isn't any observable IRS swap curve, but only Xccy. I noticed in the place I work that FX NDF are used to ...
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Availability of historical data on variance swaps [duplicate]

I want to do research on variance swaps. Where can I get/buy historical data (other than Markit)?
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62 views

The meaning of balance sheet intensive instruments

What does it mean for an instrument to be "balance sheet intensive"? I found people mean it different things. People say bonds and repos are balance sheet intensive. Some say swaps are ...
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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 ...
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Swap curve is unsmooth at front end with naive interpolation

I am looking at swap curve building at front end and find it difficult to get a smooth forward curve with a fast generic algorithm. For example, EUR 6m curve has 6m deposit, and then a series of FRAs (...
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Mismatch of periods with numeraire compared to the forward rates

In Joshi's The Concepts and Practice of Mathematical Finance Page 323--324 I believe that there may be a mismatch of periods with forward rates: Consider time partition $t_{0} < ... < t_{n}$ ...
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Bootstrapping Swap Curve

I am trying to get the zero rates from the swap curve for chilean pesos (vs Camara). I tried this code (from a previuos question similar to mine from other person) and I am very close to get the ...
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51 views

Comparative advantage for swaps

I’ve got the following problem to solve: The solution proposed by the textbook uses comparative advantage and says that A has comparative advantage in the fixed-rate market while B has comparative ...
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Why does an interest rate derivative being in- or out-of-the-money influence the optionality of a multi-currency CSA?

Background Consider a derivative contract with multiple cash CSAs, with the ability of the counterparty posting the collateral to switch to the cheapest-to-deliver (CTD) CSA. Of the possible paths of ...
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Cross Currency Swap Attribution

Can you please recommend a paper/book that discusses the attribution of the mark to market of a cross currency swap (rates, basis, fx, etc.)?
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Transactions with opposite directions in the future. Which is the best solution?

Given a currency pair and two future dates, I have to exchange the same amount of money but with different directions on these dates (example: my company works in € and I have to pay 1000\$ in one ...
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IFRS9 hedge accounting - fx risk hedge with Cross currency swap with notional reset

My understanding is that notional resetable cross currency swaps (MTM CCS) are very common amoung interbank markets, and MTM CCS are often used to hedge fx exposure. However, the notional resettable ...
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How to implement the Gaussian one factor model for Short rate

I am struggling to understand how I should use the Gaussian one factor model for short rate for valuation of a Swaption. Below is my ...
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Option on Currency Swaps

Typically when I talk about the Swaption contract, we basically fix the Currency and let the Interest rate as the key risk factor. And there are many valuation ...
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143 views

Valuation of Variance Swap

Let say I have a Variance Swap contract which is based on daily closing prices (not the continuous variance calculation) and will last between the day interval $T_1$...
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Is there some sort of index of products, their description, and pricing?

I'm imagining some sort of site where you can look up all sorts of products that are traded (swaps, bonds, options, and all the variations that they exist in), and then the site gives an extremely ...
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62 views

Why is the economic exposure in a hedge using govi futures so different between cash and derivative?

I have a question regarding swap spread trade. Let's assume I would like to bet on a swap spread widening. For this I could put a payer swap and going long the same maturity cash bond $DV01$ matched. ...
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55 views

Proper way to calculate spread between bonds and Swap

In the place I work they are calculating the spread between bonds and swaps as follow... Bonds vs Swap spread = (Swap bid-ask spread) / (Bonds bid-ask spread) Is this the "right" way to ...
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53 views

Hedging guaranteed liabilities for a pension fund

I'm trying to understand what we mean by linear and non-linear guaranteed liabilities for pension fund ? Often this exposures are hedged by Interest rates derivatives swaps and swaptions which I can ...
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151 views

PV of the Floating Side of an “Overnight Index Swap” (at the fixing Date)

I have a mathematical / theoretical question regarding the PV of an Overnight Index Swap (Floating Side) at the time of fixing. Starting from this question: How to compute Overnight Index Swap (OIS) ...
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Interest rate swap performance attribution

I have learned some attribution models such as Campisi. It decomposes the return of bond into treasury return, spread return, and coupon return. It works like: $$r = y\times dt - D \times dy_\text{...
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where I can get rates for OIS overnight Indexed Swap of various maturities? [duplicate]

do you know where I can get rates for OIS overnight Indexed Swap of various maturities? Thanks for your attention!
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Why Bloomberg USD swap curve (YCSW0023 Index) changes last month?? and why put a Financial commodity future into this curve?

The Bloomberg USD swap curve (YCSW0023 Index) had changed and bloomberg put a Financial commodity future. Why changes? What the factor make this changes? Why bloomberg put into a financial commodity ...
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462 views

Swap curve construction

I am new to this area so my question might be basic to many but please answer. For valuing interest rate swaps how will we define which curve to take, like sometimes we use usd 3m curve, or usd 3mv 6m ...
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154 views

Cross Currency Swap — Unobservable bid/ask

So in the place I work, one of the traders is dealing with a cross-currency swap within a country that has really no market for that kind of product. He wants to estimate a theoretical bid/ask, and ...
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107 views

OIS fixed rate compunding criteria

I have the following doubt: How should the OIS fixed rate be considered in computing principal+interests at the maturity of the swap? I mean, if i.e. the swap lasts 4 day (without w.e. in the middle), ...
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Inequality involving Co-Terminal/Co-Initial American vs Bermudan Swaptions

Let us consider a payment schedule $\mathcal{P}:=\{t_1,\dots,t_n\}$ which has a corresponding fixing schedule $\mathcal{F}:=\{t_0,\dots,t_{n-1}\}$. We have a series of co-terminal and co-initial swaps ...
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Market pricing of forward US Treasury rates

What instrument(s) are used for forward pricing of US Treasuries? I know that Eurodollar futures are used for the market pricing of Libor in the future, but treasury futures only have contracts 3 ...
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How to find OIS discounting factors from OIS swap rates. Please explain with example

Suppose I have the following OIS Swap rates: 1 year OIS Swap: 0.36% 2 year OIS Swap: 0.37% 3 year OIS Swap: 0.38% 4 year OIS Swap: 0.40% From these, how do I get the OIS Discounting factors for ...
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What are the margin set up or requirements in commodity swap?

Are there any margin requirements on a commodity swap ? Say it is a swap for a period of 5 years where in the actual commodity is exchanged, how does a party accepting the commodity insure against the ...
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Vega hedging swaption with caplets - precisely, what will go wrong?

I am trying to form a kind of unified perspective of how (vega) hedging an exotic with vanillas, or hedging a 'basket option' with vanillas will go wrong. So in particular, I want to be able to ...
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Quantlib: convert par swap rates to zero rates back and forth

I built a zero-coupon curve out of a generic par swap rate curve (Step 1) and I am trying to recover the swap curve back from the zero-coupon curve (Step 2). Step 1 works but not Step 2. I get close ...
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Value a Swap with Custom Coupons with QuantLib

I'd like to valuate a custom Libor3M - Fix swap with QuantLib in Python. With custom I mean, custom starting/end/payment dates for every coupon, a fixed coupon in the float leg (starting_date < ...
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Valuating Custom Amortization Schedule Libor IRS with QuantLib

I got to bootstrap the OIS and Libor 3M swap curves, and now I'd like to valuate some simple Libor3M - Fix IRS with QuantLib (in python). My problem is that some of the instruments I have to valuate ...
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Switching between collateral currencies in a xccy swap

Suppose the following: A xccy.basis swap EUR for USD. Having obtained relevant discounting and forwarding curves in both currencies respectively (i.e. OIS, LIBOR, EURIBOR), and spot exchange rate FX(...
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Is the value of an Asset-Swap (Underlying + Swap) the same value as a floating-rate bond with the same issuer, maturity, etc.?

I am trying to evaluate the impact of switching an Asset-Swap Package (fixed bond + Swap) into a floating rate bond of the same issuer with the same notional and maturity. My intuition would tell me ...
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Python libraries for bloomberg?

I am very new with python, and I am used to work with bloomberg formulas for excel. I am starting to use a lot more python in my analysis, is there any library that performs same functions as bdp, bdh ...
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246 views

Interest Rate Swap Delta ladder, under OIS Discounting

I've been looking on some information when it comes to vanilla Interest Rate Swaps, and building delta ladders under a multicurve environment. IR Swaps - Curve sensitivity at maturity node, this ...
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When working with interest rate swaps, how many decimal places should be used for LIBOR rates, swap rates and discount factors?

When working with interest rate swaps (I'm building a calculation spreadsheet), how many decimal places should be used for displaying and working with LIBOR rates, swap rates and discount factors? My ...
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Call Probability of European callable IRS

When pricing a callable IRS (say only one call date) with a diffusion model (e.g. HW 1F) with a Montecarlo resolution, one can get the call probability on the call date versus maturing the date (which ...
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FX swap trade question

(a) today, say I did a fx swap trade: long PHP/USD spot and short 1m PHP/USD forward. Then if 1m PHP interest rate goes up, I should make money (meaning i locked in paying a lower 1m PHP interest rate ...
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213 views

Inflation swaps rate vs. Break-even rate

Can someone explain me the difference between zero coupon inflation swap rate and breakeven rate? For example, currently, US 10y zero coupon inflation swap rate is about 1.4%, while US breakeven 10y ...
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Par rates, zero rates and forward rates curves in swaps

I'm new to the concept of swaps, I'm having hard time understanding what each curve relationship with a swap derivative traded in the market. Can someone please explain this? Thank you.
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105 views

Hedging with interest rate derivatives

This might be a stupid or basic concept for some of you, I'm new to the concept of hedging with interest rate derivatives, I understand how to hedge an equity portfolio but i'm struggling with the ...
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76 views

Dual curve construction

I'm new to curve construction for swaps pricing concept and I am having hard time to understand dual curve construction and what difference it from single curve ? how do we construct it ? can someone ...
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Steepness of a curve?

Sorry if this question is simple, but in the place I work they want to implement a daily check to check the swap's curve steepness. What does this mean and why would this check be necessary?

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