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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13 views

Dealer profit vanilla interest rate swap [closed]

How do dealers make money in hedging using interest rate swap? Do they use DV01 to arrive at profit?
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1answer
154 views

Question regarding fitting Euribor curve using different basis quotes using Quantlib Python

I am trying to fit a EUR curve based on the following instruments:- EONIA quotes 1m vs 6m basis quotes 3m (outright) quotes 6m (outright) quotes 6m vs 12m quotes (1) , (3) & (4) are simply ...
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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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1answer
15 views

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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3k views

What is the difference between a recovery swap and a CDS?

As I understand it, recovery swaps and CDS are both used to provide hedging against the default risk of a loan. What is the difference between them?
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4answers
3k views

How to compute Overnight Index Swap (OIS) fixed rate?

I understand that periodically participants exchange the difference in the fixed rate and the daily compounded overnight floating rates. My question is how should one compute the fixed rate? What ...
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26 views

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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58 views

Why would a 15Y swap index=EUR3M and discount=OIS, show only a EUR3M-delta at 15Y

When computing the index-delta for a swap in a multi-curve framework, only the last cash tenor seem to show sensitivity. Could anyone explain with formulas why it is the case ? For example a 15Y swap ...
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1answer
129 views

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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2answers
89 views

varswap replication doubt

I have a doubt regarding the varswap replication- I know the portfolio of options with proper weights is a static one, and that there is a dynamic position required in underlying. My confusion is ...
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1answer
63 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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15k views

What is a Constant Maturity Swap (CMS) rate?

I have been searching in books and on the internet for a basic definition and explanation of CMS rates, but I cannot find anything clear and simple. Can you explain (maybe with an example) what a CMS ...
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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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1answer
21 views

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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437 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 ...
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1answer
82 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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2answers
984 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 ...
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45 views

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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1answer
76 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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35 views

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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1answer
3k 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 ...
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46 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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3answers
2k views

What curve are you shifting when you calculate DV01 for a swap?

I understand that a general swap has 4 curves attached to it: the flat forecast curve associated with the fixed leg, the forecast curve associated with the floating leg, the fixed leg discount curve ...
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58 views

How Can I determine Swap rate?

I should calculate a swap rate of IRS contract by knowing that the risk free rate is $r(0) = 0.5$ and the defaultable rate, $r_1$, evolves in discrete time following a 2 period multiplicative binomial ...
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1answer
1k 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 ...
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Let $L$ denote the three-month US dollar LIBOR rate and an interest rate swap arrangement where fixed rate is $L$ and floating rate is $24\% - 2L$

The following is a question taken from Heard on the Street. Let $L$ denote the three-month US dollar LIBOR rate. Consider an interest rate swap arrangement where Party A pays $L$ to Party B, and ...
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1answer
81 views

FX Swap P&L question

I am currently trying to compute the P&L of a FX swap and to understand it's implications. Let's say when we sell 1M EUR spot eur/usd at 1.08 and at the same time buy a one month month forward ...
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3answers
427 views

Does a 100mio 10y swap have the same dv01 when rates are at 1% and 10%?

If not how come, whats the right way to look at it and have a quick rule of thumb to work out what dv01 is 100mio 10yr? Thanks!
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1answer
41 views

Inflation Indexed Caplet/Floorlet

Can someone explain what is it with $\psi_{i}$ (year fraction in $[T_{i-1},T_{i}]$). The formula in Mercurio (2006) as is follows: $N\psi_{i}P_{n}(t,T_{i})\mathbb{E}_{n}^{T_{i}}\left[\left(\omega\...
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swap discrete market model

Let be $M = (S_0,E,\Phi)$ a market where the risk-free rate is $r = 0$ and the Euribor $E$ evolves (annually) in discrete time following a three-period binomial model. Assume that $E_0 = 0.031$, the ...
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28 views

Day-count conventions for the floating leg of an asset swap

Which is the day-count convention in order to compute the floating leg of an asset swap? I don't know if it is: Act/360, Act/365, 30/360 or 30/365.
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185 views

Can you calculate modified duration for swaps?

I know how to calculate them for bonds. But it came to my mind this. In bonds, Macaulay duration technically is a weighted average of coupon payments. But can it be somehow calculated for swaps? Or ...
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45 views

Quantlib : How does interpolation technique in zero curve improve the valuation of interest rate swaps?

I am working on building zero curve using interpolation = ql.Linear(). I know that this method is very popular to build short and long end curve. But am wondering if there is any another way of ...
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1answer
56 views

discounting currency swap

I need help with a currency swap problem: Remaining life: 15 months. Exchanging interest at 10% on £20 million in Sterlings for interest 6% on $30 million in Dollars. If swap were negotiated today, ...
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2answers
364 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\...
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3answers
136 views

Are forward rates for an IRS computed between reset dates or between start dates?

In order to price the floating leg of an IRS I am computing forward rates for future coupons, but I'm not sure whether I have to compute such rates between reset dates or between start dates. My ...
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1answer
176 views

Python Quantlib : How to value the Non Deliverable currency Interest Rate Swaps?

I followed all the procedure in Quantlib to process interest rate swap valuation through Python Quantlib. I valued more than a million records. All the valuation is almost the expected amount. But '...
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80 views

Duration of forward starting swap

For a spot starting interest rate swap, the duration is calculated as the duration of the fixed rate leg less the duration of the floating leg. Each of these calculations is akin to calculating the ...
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1answer
161 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
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1answer
81 views

Tenor bucketing for swap interest rates?

in the place I work I've noticed that for asset class Interest Rate Swaps, tenor bucketing takes place. Example as follow: IRS with maturity 2 month being bucketed into a "3 month tenor bucket" Page ...
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2answers
170 views

Hull-White Calibration /Hypothetical Cap Pricing

I have a question regarding calibrating Hull-White (Extended Vasicek) Model to bond data. As you know, and stated in Mercurio (2005), zero coupon bond price in the Hull and White (1994); $P(t,T)=A(t,...
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1answer
193 views

Pricing of Fx Swap and Fx Forward in excel

How to do pricing of FX Swaps and Fx Forward in excel can anyone show the same which will match the bloomberg.I am calculating by adding or subtracting the fx fwd points in fx spot rate to arrive at ...
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1answer
81 views

Volatility Swap Variance swap [closed]

Why do two different products trades as vol swap and var swap. Are these products not inter-convertible? I know Var swap has convexity and vol swap does not have but i don not understand how it helps ...
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1answer
213 views

Total Return Swap valuation: Accrual vs Projected methods

For TRS contracts on equity or bond underlying the use of projected valuation method is desirable for contracts that lack bilateral early termination clause. As they are "non-breakable," allegedly the ...
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Looking for a Paper: RBS Guide to Inflation-Linked Products

I wonder if any of you have an access to "The Royal Bank of Scotland (2003) Guide to Inflation-Linked Products. Risk." paper. It was in the bibliography of Mercurio's "Pricing Inflation Indexed ...
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120 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 ...
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1answer
155 views

Eonia swap calculation of floating rate

I'm new to swaps, I've a question about how to calculate the floating rate of an EONIA Swap from market quotation, so that we can keep an eye on the evaluation of our contract Market Value, DV01, etc.....

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