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

0
votes
0answers
32 views

How is Kalman Filter used to estimate Term structure Models

I am implementing "The Term Structure of Variance Swap Rates and Optimal Variance Swap Investments" . This paper is using kalman filter to estimate the state and the mean variance and a parameters on ...
0
votes
2answers
83 views

From Libor Curve rates to “forward” zero-coupons

I am provided a 6M euribor curve, constructed from FRA's and swaps of tenor 6M on the euro, as well an EONIA curve, constructed from zero-coupons EONIA swaps. Both curves are provided as functions $d\...
1
vote
1answer
73 views

Pricing structured products (Mortgage Backed Securities) [on hold]

What would someone have to do to be able to price a structured product like Mortgage/Asset Backed Securities?
0
votes
0answers
37 views

Why doesn't tenor of Euribor index change spot rate in Quantlib?

I'm trying to create a yield curve in QuantLib based on swap rates. The swap rates I'm using have a 6 months fixed frequency and a 3 month float frequency based on LIBOR. What I don't understand is ...
1
vote
0answers
47 views

How would one go about pricing a FX future?

What model/equations would I require to calculate the price for a foreign exchange future? This is in an attempt to mitigate foreign exchange risk. Also, how could one measure a business's exposure to ...
2
votes
1answer
68 views

relationship between notional amounts of volatility swaps and variance swaps

Taking volatility swap payoff as $$( \sigma_F - \sigma_S ) * volatility~notional $$ and Taking variance swap payoff as $$( \sigma_F^2 - \sigma_S^2 ) * variance~notional $$ I am trying to understand ...
1
vote
0answers
32 views

Forward swap rate calculation from the market

Following my question Swaption valuation across time using vcub where I wanted to know how to value a swaption across time using bloomberg's vcub, I remark that I have to calculate myself the ...
1
vote
1answer
134 views

Basic question about swap/swap spreads

When I read up on swap spreads, the definition always goes something like this: The swap spread is the difference between the fixed leg of swap and a Treasury bond with the same maturity. So if the ...
0
votes
0answers
52 views

Real World pricing of a Constant Notional Cross Currency Swap

I have a question about Cross Currency (XCCY) Swap pricing in the real world. There are plenty of papers going nicely into detail, how XCCY Basis Swaps and XCCY Constant Notional Swaps work. Also ...
0
votes
1answer
60 views

When a bank enters a swap with a counterparty, when does it decide to use a OIS curve as its CSA Term, versus a counterparty specific “CSA Curve”?

What determines whether a swap should be discounted against a standard OIS curve VS a 'custom' CSA curve specific to the swap's counterparty? (such custom curves are marked as spreads to some base ...
2
votes
1answer
2k views

How to compute for basis adjusted forward rate?

To give you a brief background, I'm valuing a fixed-for-float Interest Rate Swap (IRS) using Bloomberg. I put in a notional amount in (USD) and a assigned 6MO USD LIBOR as the reference index for the ...
0
votes
1answer
45 views

Multi-legged Swap pricing

can anyone guide me how to price a multi-legged swap and whether I need Monte Carlo / LMM based approach or if there is a closed form solution. Receive leg "Libor 3m +1%" Payment leg If Libor is ...
0
votes
0answers
57 views

Macaulay Duration Calculation on LIBOR/Swap term structures

I'm a bit confused as to how to use the Macaulay Duration Calculation method to calculate the duration of a swap in which the rates for both paying and fixed change every six months (LIBOR/Swap Term ...
0
votes
1answer
127 views

USD Swap day convention (IMM) Feb 19

Quick question about something that I am not clear about February 19 IMM date is 20th of February, if I want to find the fixing day for that date I would be looking at February 18th, in the US Feb ...
3
votes
0answers
39 views

S. Bossu's Correlation Swaps Model

I am reading Sebastien Bossu's "A new Approach For Modelling and Pricing Correlation Swaps" (link). I am recalling some of the definitions from the paper and would like to understand how to prove one ...
0
votes
1answer
319 views

Hedging amortising interest rate swap with vanilla swaps

Is it possible to hedge an amortising interest rate swap (linearly decreasing notional) with a series of vanilla interest rate swaps? With the amortising swap originated today at par rate and the ...
4
votes
1answer
258 views

Exposure calculation of a re-coupon swap

How to calculate the exposure of a recoupon swap (when the MTM of an i.r. swap is settled and the fixed rate is reset to the prevailing swap rate for the residual maturity). It's used to reduce the ...
1
vote
2answers
504 views

Calculating Fx Swap from Cross Currency Swap

I am trying to calculate Fx Swap points of a currency pair from the corresponding Cross Currency Swap rate on the same maturity. I.e if I know that my USD/TRY 5Y rate is 16% and my USD/TRY spot rate ...
3
votes
1answer
293 views

Cross-Currency Inflation-Linked Swap

I am trying to find any references to cross-currency inflation-linked swaps. Have anyone encountered them and can describe how they work and how they differ from standard year on year inflation swaps?
1
vote
1answer
545 views

Pricing Uneven FX Swaps

I'm trying to figure out how to price uneven FX swaps. I just started on a FX trading desk and have been told that the all-in rate for a 2-legged FX swap is equal to: 1) Quote for market side of net ...
10
votes
3answers
2k views

Deriving Interest Rates

I am trying to teach myself about interest rate swaps, how they are priced, etc... Easy enough - just comparing cash flows of fixed and floating rate bonds. However, what I'm struggling with is how ...
1
vote
0answers
49 views

How can we value NPV for a standard FX Swap?

hope you are all well! Was just wondering how we can value the NPV on the value date for a FX swap - i'm sure it's by evaluating the interest rate payable/receivable from the trade date until the ...
2
votes
1answer
101 views

What is the intuitive explanation for the spot risk in an FX swap?

I am familiar with FX swap and the basis/IR risk they carry. However, know that they have a very small spot risk component which arises from the present value of future cash flows different from the ...
2
votes
0answers
75 views

USD OIS curve. Why is the the bid bigger than the ask for maturities > 7 years?

I was wondering why the bid is larger than the ask for maturities bigger than or equal to 7 years? If i export the screen to Excel i can see how the bid and ask swap rates are calculated. For the ...
1
vote
1answer
76 views

Concentration risk in Rates

What are some good ways to assess the concentration risk for a rates curve or by currency when volumes traded by instrument are not easily available? For ex, if for some currencies, the PV01 at ...
3
votes
1answer
169 views

IMM Swaps - Accrual & Fixing Schedule

I am wondering how accrual periods & reset dates on Quarterly-IMM swaps are different to normal swaps (in terms of conventions). For example: Normal Swap: ...
8
votes
1answer
217 views

Derivation of VIX Formula

I've read a lot of derivations about VIX formula. I can say it is -adjusted- fair strike of variance swap. But I can't see how it goes from variance swap rate to VIX formula. In particular I can't see ...
1
vote
1answer
44 views

Port a model dependent swaption sensitivity to a new model

I have a short rate model in which I have (among others) the following metric (for leverages) for a swaption : $$L = \frac{\frac{\partial}{\partial r}V_0^{\textrm{Swaption}}}{\frac{\partial}{\partial ...
1
vote
3answers
329 views

Commodity Asian Swaps

I'm trying to find info about asian swaps on oil/energy products and about their pricing methods. However, all I could find are on asian options. Would be glad if you can provide me with some ...
2
votes
1answer
117 views

Valuing an interest rate swap using a par swaps curve?

I've worked through this problem already and was hoping for some feedback on my approach. The problem description is: You have a notional amount of 100 million paying fixed coupons of 8% annually for ...
3
votes
3answers
201 views

PCA for Risk bucketing

I'm working on a project to justify the use the certain tenors (2y, 5y, 10y, 30y) for risk bucketing. I'm a little stuck after calculating the principal components. Just to describe my approach- a) ...
4
votes
1answer
4k views

What is the difference between OIS Swap vs Basis Swap?

What is the use of OIS Swap Curve vs. Basis Swap Curve?
2
votes
0answers
126 views

How to interpret DV01 in terms of PCA equivalent?

I have computed the PCs for daily changes in the UST yield curve over the last 5 years using the covariance matrix and can explain 94% of the variance using the first two components, which is good ...
1
vote
1answer
143 views

bootstrapping bloomberg

Does anyone know the zero rate here at -0.23022 is derived? I have tried (1+0.0056*0.503)*(1+-0.00232*0.086)=(1+?^(1/0.589). Solving for ? gives me -0.002344. I have tried simple and compounded ...
2
votes
1answer
146 views

Sovereign bond CDS data

Does anyone know where I can download from historical data for sovereign bond CDS (credit default swaps) rates? preferebly free?
2
votes
3answers
136 views

Structured product sellers and div swaps

From a Barclays primer on dividend swaps: We note that for shorter periods of time, implied dividends can be more volatile than spot as dividends often trade away from ...
2
votes
1answer
273 views

How do swap dealers make money from trading cancellable swap?

A fixed-rate payer (e.g. a swap dealer) of a cancellable swap pays more interest than he receives because he has the right to terminate the swap after a certain time if rates fall. What are the ...
3
votes
2answers
793 views

How to calculate this swap rate

What is the 2x5 swap rate? here 2x5 swap rate refers to the 3-year swap, 2 years forward.
0
votes
1answer
76 views

CNY IRS Fixed Vs 3 Month SHIBOR. Can any one please confirm the curve practices ?

AM trying to match CNY Swap Curve with Bloomberg. Yields unto 9 months can be converted to dfs using 1/(1+rt), where t = Actual Number of Days / 360. One year and boot strapping method was used with ...
1
vote
3answers
3k views

A question about dates generation

I am actually trying to strip Markit IR curves, following their specs here : http://www.cdsmodel.com/cdsmodel/assets/cds-model/docs/Interest%20Rate%20Curve%20Specification%20-%20All%20Currencies%20(...
0
votes
1answer
116 views

What is the value/price of a bond paying floating rate

I am going through J.C.Hull for swaps. Where he says we can value a swap using bonds. Let $B_{fl}$: value of floating rate bond, $L$ notional principal. Why is $B_{fl} = L$ just after a payment ? What ...
2
votes
0answers
58 views

Convert Short rate from HW simulation into Swap rates

I am trying to price an exotic option that requires me to simulate 10 yr swap rates. I have calibrated a 1 factor HW model to swaption prices. However, my understanding is that the HW model describes ...
3
votes
1answer
1k views

Spot/Next and Tom/Next FX forward swaps

could somebody please tell me what is the main difference between Spot/Next and Tom/Next FX forward swaps? I know that both are used to roll spot FX position settlement to 1 day forward but I really ...
0
votes
1answer
2k views

Bloomberg terminal swap zero curve calculation

I would like to ask about swap zero curve calculation algorithm by Bloomberg terminal. This is a plain vanilla CZK interest rate swap, fixing the Prague IBOR. My task is to calculate zero rates from ...
3
votes
3answers
3k views

How to build a cross currency swap pricer?

We're looking to build a pricer to convert a funding spread in a given currency over a specific funding basis e.g. 20 bps EUR 3m€ and convert it to a funding spread to a different currency with a ...
1
vote
3answers
86 views

heding bond risk with swap

How would a bond trader hedge his/her interest rate risk? A nature way is to hedge it with interest rate swap. Is this a choice in practice ? is their any risks associating with this hedging strategy. ...
2
votes
2answers
680 views

Why is the fair strike of a variance swap called implied volatility?

Probably an easy question for some, but I noticed most of my co-workers call the fair strike of a variance swap implied volatility. Why is that ?
4
votes
1answer
441 views

Hedging with variance swaps: how to calculate the notional

Returns on an asset are negatively correlated with own variance, and I would like to set up a hedge with a variance swap (no options are traded). I need to decide on the notional of the swap: any ...
-1
votes
1answer
1k views

Compute I-spread from ASW-spread (or vice versa)

The I-spread ("mid swap spread" or yield-yield spread) is a standlone measure of credit risk, a security against matched maturity vanilla swap rate. Consider a package in which the investor receives ...
0
votes
1answer
348 views

For a fixed-fixed cross currency swap, can I use a curve with two floating legs to discount the cash flows?

I'm doing a USD to INR fixed-to-fixed cross currency swap. The default curve has a fixed and a floating rate. However, the curve that I'm looking to use has floating rates on both legs. Would this ...