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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2answers
721 views

What is the instantaneous P&L of a Variance Swap?

What is the instantaneous P&L of a variance swap. Is it $(\sigma^{2}_{t}-\sigma^{2}_{implied})dt$?
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1answer
110 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 ...
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1answer
162 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 ...
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1answer
216 views

Value at Risk for a plain vanilla interest rate swap

Hello I have question regarding the computations of the Value at Risk for a plain vanilla interest rate swap (i.e. same currency and fixed-for-floating). I have a data set consisting of the Swap ...
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1answer
302 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 ...
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1answer
179 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?
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1answer
121 views

Determining discount factors for non-standard maturities

Let's say we'd like to find a par rate for a 1 month forward starting 20-year interest rate swap. In this case, we'd need to discount cash flows for the payment periods shifted +1 month from standard ...
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1answer
298 views

Swaption pricing

I am trying to understand the pricing of various types of swaptions. Suppose I have a swap that starts in 3 months time. How would I go about pricing a swaption on this swap in the following cases: ...
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1answer
953 views

Constructing Swap Curve from LIBOR

Say I'm considering a long maturity fixed rate swap, for instance 20 years paid semi annually. Now I want to find the fixed rate for this hypothetical swap. I understand that this fixed rate is going ...
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2answers
152 views

Swap prices (preferably based on 3 month LIBOR)?

Where can I find a listing of forward swap rates based on libor. E.g. pricing on a swap of rates floating over 30 day libor for 3 year fixed, one year from now?
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1answer
506 views

Building curves using onshore or offshore JPY overnight rates?

I am trying to build Japanese Yen interest rate curves. When defining the curve instruments for the 'OIS' (discount) curve (aka TONAR), I am uncertain as to which rate to use for the overnight deposit ...
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0answers
96 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 ...
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0answers
157 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 ...
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0answers
59 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 ...
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0answers
162 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 ...
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0answers
144 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 ...
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0answers
926 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 ...
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0answers
55 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 ...
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0answers
80 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, ...
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1answer
459 views

decompose correlation swap pnl

For a Variance swap we can split the pnl into a realized part and a "forward going" part. To be more precise: Assume we enter the trade at t0, and the variance swap has tenor T and a strike $Kvar$. ...
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0answers
233 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 ...
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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 ...
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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-...
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0answers
616 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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3answers
487 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 ...
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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(...
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1answer
3k views

Swap contract comparative advantage

Corporation $A$ has an excellent credit rating and can borrow at a fixed rate of $5\%$ or a floating rate of LIBOR + $1\%$. Corporation $B$ has a somewhat less excellent credit rating and can borrow ...
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1answer
846 views

Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
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3answers
93 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. ...
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2answers
11k views

formula for physical DV01 of interest rate swap

Most answers to the question "what is the dv01 of an interest rate swap" are along the lines of: "compute the difference between the price of the swap and its price using a curve perturbed by 1 basis ...
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3answers
119 views

Interpolating the swap curve

Does anyone know how I can calculate the swap rate in between main tenors for specific dates? For example: what is the implied swap rate in 1 year, 60 days time. Is there an easy way to do this in ...
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1answer
153 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 ...
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2answers
1k views

Basis risk, spreads and discounting

There is a lot of information to be read on basis risk, spreads and discounting. After reading some information, I have an idea about what basis risk is about and why this type of risks should be ...
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1answer
342 views

Using PCA model to capture Risk on a box trade on Swap spread

I have PCA models to capture Risk for Swaps trading I have a question regarding a multi-leg package which has 4 legs (box spread). Typically, a box spread is a switch between two Swap Spread, where ...
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2answers
4k views

What is the EUR swap curve on Bloomberg? I.e. what is the EUR equivalent of S23 curve on Bloomberg?

I am trying to understand the currency basis calculation and whether there is a difference in currency basis when quoted vs. OIS and -IBOR rates.
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1answer
3k views

Swap Rate vs Par Rate

If we calculate the par rate for n periods, why does the nth swap rate equal the par rate? A mathematical formulation would be helpful apart from an intuitive answer. Edit: Example:- A 2 year ...
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1answer
62 views

Why is the discount function non increasing if pure cash holdings are feasible?

I am struggeling with the question, for example lets take a swap with rate of 3.2 for one year and 3.6 for 2 years and Discount Factor 0.96899 for the first year and 0.93158 for the second year. ...
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1answer
74 views

Why might a manager consider using an interest-rate in which the notional principal amount declines over time?

Say swap would be used to convert the payments of its portfolio of fixed-rate residential mortgage loans into a floating payment. Why might a manager consider using an interest-rate in which the ...
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1answer
76 views

Pricing structured products (Mortgage Backed Securities) [closed]

What would someone have to do to be able to price a structured product like Mortgage/Asset Backed Securities?
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1answer
2k views

Valuation of an FX Swap

What is the value of an FX swap? As far as I understand, a typical example of an FX swap would be the following: company A agrees to lend 1000,000.00 euros to B and in exchange B agrees to lend 1000,...
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1answer
392 views

Build a swap curve / Swap Hedging

I’m going through the exercise of building a swap curve. I understand I need libor rates for the short-end, futures for the medium-end, and swap rates for the long-end. Should I be using bid, mid, ...
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2answers
1k views

Is the “swap curve” synonymous with the “yield curve”?

Looking at the swap curve construction here: http://www.bankofcanada.ca/wp-content/uploads/2010/01/wp00-17.pdf it seems to be constructed in an identical fashion as the yield curve as described here:...
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1answer
334 views

Hedge variance swapping by vanilla option(constant vega portfolio against underlying asset)

One book said hedging variance swaps $$I= \sqrt{\dfrac{1}{t}\int^t_0\sigma^2(S,t)}d t$$ by vanilla option,say value $V(S,E;\...
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1answer
189 views

Variance Swap volatility

In an article, it is mentioned that a parameter is "the variance swap volatility at time t". I know what a variance swap is but I don't know what they could mean by "variance swap volatility". ...
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1answer
79 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 ...
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1answer
46 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 ...
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1answer
189 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 ...
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1answer
331 views

Quantlib: Getting error trying to price a Swap

I have bootstrapped my curve based on end-of-day data for 24th Nov, 2017 I am then using that to price a off-market swap as below: ...
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2answers
1k views

Pricing Mark-to-Market Basis Cross Currency Swaps and Subsequently Constant Notional

Currently I'm working on my Master Thesis in Quant Finance in cooperation with a company. I would like to thank you very much for your time and help in advance! In my thesis I want to price Mark-to-...
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1answer
2k views

Interest Rate Swap DV01

thank you in advance anyways! I do have a question that drives me mad. How do i calculate the Swap DV01 for a Interest Rate Swap? I think for a bond i multiply the discounted cashflows times the ...