# 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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### Libor OIS basis swap equation

I'm a little embarrassed about this because I have a PhD in math, but I'm having a little trouble working out how to bootstrap an OIS curve from libor rates and basis swap rates. If I had an equation ...
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?
4k views

### Fair swap rate of an amortizing swap

Recently I came across the problem of amortizing swaps. This is an agreement, where fixed payments and floating payments (e.g. 3-months LIBOR + spread) are exchanged based on a notional that is ...
128 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 ...
75 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 ...
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 ...
143 views

### Recommended Instruments (and sources) for Constructing Money Market Yield Curves

What instruments are the current industry recommendations for constructing money-market yield curves in some major currencies? The switch after the crisis to multi-curve methods is well documented on ...
186 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 ...
356 views

### Transform a 3M FRA Rate to a 6M FRA Rate

I have a question whether it is possible to transform 3M FRA rates to 6M FRA rates without having any spreads available. Let's give an example: FRA 3M: FRA 1x4 FRA 2x5 FRA 3x6 FRA 4x7 FRA 5x8 FRA ...
960 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 ?
918 views

### USD-Federal Funds for OIS swaps vs USD-Federal Funds for Basis swaps

Anyone knows why the OIS leg for basis swaps pays the average rate instead of the geometric average compounding rate as expected for a regular OIS swap leg?
141 views

### Swap rate calculation if reference rate differs from risk free rates

I want to find a swap rate, for an IRS where the floating is Libor+x bp where x is a constant. I have a risk free curve which is not the libor curve. I also have the libor rates. How can I calculate ...
281 views

### Dual discounted forward curve

I was wondering how to calculate the forward rates based on OIS discounting for the half year terms. I know how to do this for the full year terms -> just making sure that the two legs are equal to ...
344 views

### convexity adjustment for pricing mark to market (mtm) cross currency swap

may I know where the convexity adjustment is from and in practice, how is it usually calculated? is it coming from the correlation between fx and rates ? am I right that non-mtm cross currency swap ...
109 views

### What does **Long Call EURUSD** mean?

What does Long Call EURUSD mean? Does it mean Long Call EUR and Short Put USD? When we draw payoff do we consider only w.r.t. to CCY1 i.e. EUR in this case?
176 views

### Turning an amortising swaption into a normal swaption

Is there a way to enter a trading strategy in which the notional of the cashflows of an amortising swaption become all the same? For example, imagine the notional for the first four cashflows of an ...
1k views

### Collateralized / uncollateralized swap

Is a fully collateralized interest rate swap considered free of counterparty credit risk? Or close to risk free? Therefore discounted by the rate that best proxies the risk-free rate (which is the OIS-...
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### 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 ...
225 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 ...
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 ...
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 ...
982 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 ...
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 ...
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 ...
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, ...
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 $Kvar$. ...