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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7
votes
1answer
436 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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0answers
333 views

Swaptions on SONIA/SOFR/ESTR

Given that LIBOR is being decommissioned and we must start building liquidity in swaptions on the OIS swaps, how do we price them? i.e. If I have a swaption on SONIA/SOFR/ESTR etc how does the pricing ...
5
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0answers
420 views

How to calculate average entry price for perpetual swap contracts?

I'm trying to calculate the average entry price for perpetual swap contracts for use in back-testing a trading strategy, as per Bitmex's documentation: A Perpetual Contract is a derivative product ...
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0answers
74 views

Replication of a dividend swap

I wanted to know how banks replicate dividend swap, my best guess is to take the spread between a Total Return Swap and a Forward.
3
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0answers
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 ...
3
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0answers
91 views

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 ...
3
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0answers
234 views

Variance swap “fast” models

As far as I understand, Variance Swap (VS for short) function as follows : no payment when entering the contract at maturity the VS buyer pays a strike $K^2$ and is paid (by the VS seller) the ...
3
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0answers
57 views

How to get swap reporting data from repositories ICE and CME?

Bloomberg and DTCC both release swap reporting data in form of downloadable files which can be analyzed later on. I have been looking for the same on ICE and CME sites, but couldn't find. How can I ...
3
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0answers
169 views

Overnight Index Swaps

Just a very quick general question regarding the OIS market. Is it common place on termsheets to state a PV Notional and additionally a FV notional, if so what is the purpose of this and does market ...
3
votes
1answer
204 views

What is mathematically rigorous way to estimate floating swap cash flow in the future?

In vanilla swap, the FL payments is fixed on one date and paid on the next reset date. So the next payment is known. However, the payment after that is not known. What would be the best estimate of ...
3
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1answer
534 views

Questions about Markit rates curve bootstrapping

I am reading the following two Markit documents concerning the bootstrapping of respectively the USD rates curve and the EUR, GBP, JPY, CHF, CAD, HKD, SGD, AUD and NZD rates curves. (Both versions are ...
2
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0answers
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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0answers
42 views

Retrieve zero coupon curve from forwards

Let's suppose I am given a forward swap curve of a certain maturity (10Y). The curve is not very smooth and is decreasing but whatever. I have the curve : $S(0,t,t+T) = \frac{P(0,t) - P(0,t+T)}{\sum_{...
2
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0answers
170 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 ...
2
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0answers
223 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 ...
2
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0answers
76 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 ...
2
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0answers
211 views

Why is the SOFR par coupon rate trading higher than Fed funds?

SOFR is a 'secured rate' while the latter is not. Therefore, I would assume a 1y SOFR swap to trade at a lower par rate than a 1y fed funds overnight index swap. Any insights would be greatly ...
2
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2answers
978 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 ...
2
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0answers
172 views

Discount rate in IRS valuation

This might be a very basic question but I didn't find the answer in the materials I saw on Google. What is the interest rate used to compute the discounted cash flows for both the fixed and variable ...
2
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0answers
1k views

how to calculate forward delta (not spot delta) of a swap?

how could I calculate the forward delta of of a cross currency swap? Suppose I have a swap contract to exchange 1 mio USD with 66.15 mio INR, 3 months later, current Spot is 65.04, how can i ...
2
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0answers
91 views

Comparing Hedging Strategies

Say I am an American issuer, and I've issued some bond denominated in CAD. I've hedged the coupon by entering into an FX USD/CAD fixed for floating swap and I receive the fixed leg and pay floating, ...
2
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0answers
256 views

CVA for an inflation linked swap

I am trying to value an inflation linked swap and wish to calculate the associated CVA and DVA. I think the best way to approach this would be via a simulation. Suppose I wish to calculate CVA over ...
2
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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 ...
2
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0answers
1k views

How to calculate cf and interest accruals of the swap?

How to calculate to calculate daily interest accruals and cashflows for the full term of the swap, given notional, effective date, maturity date: (total one year), accrual: ACT/360 payment: semi-...
2
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0answers
643 views

How to calculate a the PFE for a Swaption?

How do you calculate the Potential Future Exposure (PFE) for a swaption? Do you incorporate the dynamics of implied volatility when you are running your simulations? Is there a standard way to ...
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0answers
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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0answers
25 views

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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0answers
27 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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0answers
94 views

Bloomberg SWPM Zero Rate Curve Conventions

Referencing : Bloomberg SWPM: Day count to calculate discount factor for US0003M Hi, I have a hard time reproducing the conversions between Discount factors and zero rates for an XCCY Swap I have ...
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1answer
146 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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0answers
42 views

CME Futures used in building LCH USD swap curve

To build a LCH swap curves, common benchmarks include cash rates, euro dollar futures and swaps. However, the euro dollar futures only exist in CME. So when you use euro dollar futures (only exist in ...
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0answers
41 views

Correlation coefficient without cash flows?

I'm an intern at a company and one of our tasks is to calculate the the probability of default of both participants of a Swap(a Client and a Bank), for which we first need the correlation coefficient ...
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0answers
25 views

Possible interference of Cross-Rate inaccuracy and CIP Deviations

I am currently attempting to calculate historical deviations from covered interest rate parity between 2013 and 2018. I recently read that: "Unlike the interbank spot market, in the interbank ...
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0answers
54 views

Variance swap correlation trade

I found two highly correlated assets that have spread in 3M realized and implied vol at historical minimum. To go long on this spread I thought of using two variance swaps. Would it be cheaper to ...
1
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2answers
363 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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0answers
61 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 ...
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0answers
142 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 ...
1
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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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0answers
243 views

VarSwap PnL formula

I came across this formula for the varswap PNL: let $r_i$ be the log return over $[t_i,t_{i+1}]$ and suppose we risk manage the VS at a fixed implied volatility sigma, the PnL of (the payoff) over ...
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0answers
302 views

Does delta adjusted exposure make sense for an equity variance swap?

The software vendor that I am using for the calculation of the market risk exposure claim that they cannot compute the delta adjusted of the equity variance swap positions since there is no specific ...
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0answers
131 views

Multi objective optimization Swaption/Caplets joint Calibration

People suppose that we have a two asset type portfolio optimization (as Intrument Type 1 and 2). In the each portfolio refered by the instrument type there are 2 asset so we have four asset in total. ...
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0answers
55 views

cross currency swap expiry principal amount

Quick question on cross currency swaps. On expiry, principal payments are exchanged again. What happens when on expiry, the exchange rate is not the same as when the swap was first entered into? The ...
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0answers
259 views

Quantitative Strategy on Variance Swap (master thesis)

I am doing a master thesis on Variance Swap and my dear friend told me I could find some valuable help on the "Quantitative Finance Stack Exchange". I would like to apologise beforehand, if my ...
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0answers
1k views

how to calculate the theta of a swap?

Suppose I have a swap contract to exchange 1 mio USD with 66.15 mio INR, 3 months later, current Spot is 65.04, how could I calculate the theta of this deal?
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0answers
318 views

Variance Swap Vega

I am currently reading the paper of Derman and al for my master thesis on Variance Swap. At one point one says that "The variance vega is largest when the option is ATM", considering here a call ...
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0answers
145 views

Margin requirements for OTC variance swaps

It is not clear for me the mechanism of margin requirements for OTC variance swaps. I don't see in supplementary information to OTC Swaps the rules of margin maintenance or initial margin or ...
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0answers
167 views

Estimate the risk of swaptions

I would like to model OTM Swaptions. I can use some implementation of the Bachelier model (not B76 due to negative rates) and implied volatilities from Bloomberg. For 10Y X 10Y (10 years option ...
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0answers
58 views

Using Forward Equity Returns to Value Stream of Equity Return Cash Flows

Can I value the equity leg of an equity swap using the projected forward equity returns? In other words, for a sequence of times $t_{0}<t_{1}<\ldots<t_{n}$, where $t_{0}$ begins a brand new ...
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0answers
35 views

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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0answers
42 views

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 ...