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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47 views

Australian banks funding

"Typically, Australian banks pay a small premium to swap foreign currency into Australian dollars. This premium is also referred to as the basis, which is the difference between the implied cost ...
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Brazil FX market “cupom cambial” [duplicate]

I am trying to understand the role of cupom cambial (onshore dollar rate) in relation to the BCB swaps which are domestic NDF settled in real. "The cupom cambial is priced in basis points as an ...
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OIS Floating Leg Value at Swap Start with OIS discounting with payment lag

Is it safe/OK/acceptable to assume that $PV_{float}=1$ at on a Swap that projects and discount with the same OIS index, at starting date, if payments are done with a 2D lag i.e. $t_{pay} = t_{...
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how do traders typically hedge a callable zero coupon bond?

i've seen termsheets of callable accreting notional swaps where the accretion rate equals the fixed coupon rate. apparently these are used to hedge callable zcb's. but it doesnt seem to make sense! ...
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Swap data- couldn't find any

I'm a student and i amm looking for a swaps rates historical data for long tenors in purpose to estimate yield curve (for example in GBP). My question is where could I find it?
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Carry & Roll, roll down current curve valid assumption?

The assumption for calculating the roll of a fixed income instrument is that you roll down the current spot curve. So if 10y rate is 2% and 9.5y is 1.8% the carry for the coming 6 month horizon is ...
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32 views

Free swaps/swaptions data

I would like to play around a bit with some yield curve models. I am looking for a way to get a hold of free swaps/swaptions data. Obviously, the quality does not have to be super good, I am merely ...
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59 views

Cross Currency Swap Bids and Offers?

Could someone please explain why certain Cross currency pairs like EURUSD or GBPUSD show higher bids then offers in Bloomberg? e.g for a 5y GBP/USD Xccy Swap bids could be at -5 bps and the offer at -...
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'Optional Early Termination' clause

For market practitioners such as swap traders out there: in your experience, does the below clause when bilateral is similar to a difference between European and <...
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What drives a downward move in the Xccy Basis curve?

this is something I wanted to understand for a while. For example, I observed recently the yields across the Mexico Xccy Basis curve have been decreasing 1-2 bps on last days. What could possibly ...
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Comparing swaps with bonds

Swaps and bonds have a lot of similarity although one is a security and the other is a derivative. For example, libor for swaps is like repo rate bonds (thinking them both as the funding leg) fixed ...
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83 views

Understanding Asset Swap Spread Example

Here is an overview of the asset swap spread I found online: https://www.deriscope.com/docs/AssetSwaps_LehmanBrothers_2000.pdf I can't seem to make sense of the numbers in this example: Specifically, ...
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Funding foreign asset purchase with repo

https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf extract from page 38 An investor wants to buy a foreign currency security with domestic cash but does not wish to run FX risk. Then, three transactions ...
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Swaption on Forward-Starting Swap “Replication”?

Lately I was thinking about forward-starting swaptions vs. options on forward-starting swaps a bit, and I started wondering about the following: Suppose we are at time $T_0$ (today) and we want to ...
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When you rollover a FX Forward, do enter the FX swap at the spot rate or previous forward rate?

from below link: https://www.linkedin.com/pulse/distinction-between-fx-swaps-currency-risk-management-akubue-cfa/ "if the date of settlement of the export proceeds has been extended by three ...
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FX forward hedging with rollover

I was wondering when you enter a swap at the forward expiration under which scenarios you are hedged or not. For example, a European exporter buys a fwd to hedge a delivery of $1m in 6 months (long 6m ...
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Swap Spread Arbitrage & Rates/STIRT Vol

Concerning the classic swap spread arbitrage trade where you (as far as I understand it): Buy a treasury and borrow in GC repo, paying repo rate and funding the haircut in short term unsecured ...
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FX swap par value

What is the relationship to apply so that an FX swap value is 0 at inception? For example, for a short 1y EURUSD swap with 1mm euro notional, at inception spot = 1.1000 and 12m fwd = 1.1022, EUR 1y ...
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Is the pricing formula for FX Forwards the same for FX Swaps?

If I use fwd_price = S*(1+r_term)/(1+r_base) to determine the theoretical value of a forward, how should I tweak the formula to price a FX swap? Assuming swap = fwd-spot, swap_price = S*(1+r_term)/(1+...
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117 views

Hedging against FX for bond portfolio

Let's say I've bond is USD with a maturity of 25yrs and yield of 5% and coupon 7%, but I'm located in Europe and wanna hedge the USD risk, How can I use cross currency swap to do this ?
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Why Swap rate is accompanied with par yield?

Recently I got some question about Spot Curve which is extracted from Swap rate. And the logic starts with this : Fixed rate bond's value is equal to Floating rate bond's value "at reset date&...
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Which volatility should I use in a long-term futures swaption?

Consider an option expiring in 12/31/2023 on an hourly swap from 2024 through 2029 such that: a) I pay the floating price of electricity and b) receive $20 in return. Using shaped monthly futures and ...
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What does it mean In FX trading you using a T/N swap to avoid physical delivery of the currency? [duplicate]

I understand you use T/N swaps to rollover FX positions and so avoid physical delivery but I dont quite get how this happens in reality. For example, if I am long EURUSD and need to deliver/sell USD ...
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186 views

Downward Sloping Swap Spread Curve

After observing swap spreads in the market, I have noticed that the swap spread curve is downward sloping. Why is this? I have tried looking around the internet for answers, but have not found ...
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73 views

LIBOR Quoting Conventions and Swap Pricing

Given that LIBOR quotes have value date T+2, when considering a simple IRS, which dates are considered when fixing the floating rate? Say floating leg is Euribor 3M and next fixing date is today (02/...
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61 views

Zero notional on swap leg

Can there be a swap with zero notional on one leg alone? If so, what is the swap used for ?
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78 views

Swaption decomposition - forward options and option on options

I am following through the book "An Introduction to Financial Derivatives" by Salih Neftci. According to the book, a swap can be decomposed into cash flows from forwards and options. I am ...
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Using Quantlib to pricing a FR007 swap (which is compounding interest rate in floating leg)

You can treat the FR007 swap like this: The fixed-rate leg is the same as the fixed-rate leg of the LIBOR swap. The floating rate can be treated as the combination of some 3-months maturity compound ...
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What is the market convention for the stub floating payment on a vanilla swap?

Let's say I have a plain vanilla "broken date" swap (Annual fixed, 6m float) that I enter into today (10th Nov 20 for settle T+2, 12th Nov 20) and which ends on 16th August 2023. The swap is ...
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Do all inflation swaps reference the non-seasonally-adjusted index values?

Inflation CPI values (typically published monthly except Australia) are typically published in both SA (sseaonally adjusted) and NSA (non-seasonally adjusted) variants. Inflation swaps reference the ...
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Question on Xccy swaps curve observability

Trying to get a sense of the following ... In some emerging markets such as Argentina, there isn't any observable IRS swap curve, but only Xccy. I noticed in the place I work that FX NDF are used to ...
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Availability of historical data on variance swaps [duplicate]

I want to do research on variance swaps. Where can I get/buy historical data (other than Markit)?
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The meaning of balance sheet intensive instruments

What does it mean for an instrument to be "balance sheet intensive"? I found people mean it different things. People say bonds and repos are balance sheet intensive. Some say swaps are ...
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OIS rate to build Term structure

There are some discussions (e.g. Difference between OIS Rate and Fed Funds Rate) on usage of OIS rate to build the Libor term ...
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Swap curve is unsmooth at front end with naive interpolation

I am looking at swap curve building at front end and find it difficult to get a smooth forward curve with a fast generic algorithm. For example, EUR 6m curve has 6m deposit, and then a series of FRAs (...
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Mismatch of periods with numeraire compared to the forward rates

In Joshi's The Concepts and Practice of Mathematical Finance Page 323--324 I believe that there may be a mismatch of periods with forward rates: Consider time partition $t_{0} < ... < t_{n}$ ...
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Bootstrapping Swap Curve

I am trying to get the zero rates from the swap curve for chilean pesos (vs Camara). I tried this code (from a previuos question similar to mine from other person) and I am very close to get the ...
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Comparative advantage for swaps

I’ve got the following problem to solve: The solution proposed by the textbook uses comparative advantage and says that A has comparative advantage in the fixed-rate market while B has comparative ...
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Why does an interest rate derivative being in- or out-of-the-money influence the optionality of a multi-currency CSA?

Background Consider a derivative contract with multiple cash CSAs, with the ability of the counterparty posting the collateral to switch to the cheapest-to-deliver (CTD) CSA. Of the possible paths of ...
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Cross Currency Swap Attribution

Can you please recommend a paper/book that discusses the attribution of the mark to market of a cross currency swap (rates, basis, fx, etc.)?
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Transactions with opposite directions in the future. Which is the best solution?

Given a currency pair and two future dates, I have to exchange the same amount of money but with different directions on these dates (example: my company works in € and I have to pay 1000\$ in one ...
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178 views

IFRS9 hedge accounting - fx risk hedge with Cross currency swap with notional reset

My understanding is that notional resetable cross currency swaps (MTM CCS) are very common amoung interbank markets, and MTM CCS are often used to hedge fx exposure. However, the notional resettable ...
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How to implement the Gaussian one factor model for Short rate

I am struggling to understand how I should use the Gaussian one factor model for short rate for valuation of a Swaption. Below is my ...
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Option on Currency Swaps

Typically when I talk about the Swaption contract, we basically fix the Currency and let the Interest rate as the key risk factor. And there are many valuation ...
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156 views

Valuation of Variance Swap

Let say I have a Variance Swap contract which is based on daily closing prices (not the continuous variance calculation) and will last between the day interval $T_1$...
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Is there some sort of index of products, their description, and pricing?

I'm imagining some sort of site where you can look up all sorts of products that are traded (swaps, bonds, options, and all the variations that they exist in), and then the site gives an extremely ...
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70 views

Why is the economic exposure in a hedge using govi futures so different between cash and derivative?

I have a question regarding swap spread trade. Let's assume I would like to bet on a swap spread widening. For this I could put a payer swap and going long the same maturity cash bond $DV01$ matched. ...
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101 views

Proper way to calculate spread between bonds and Swap

In the place I work they are calculating the spread between bonds and swaps as follow... Bonds vs Swap spread = (Swap bid-ask spread) / (Bonds bid-ask spread) Is this the "right" way to ...
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53 views

Hedging guaranteed liabilities for a pension fund

I'm trying to understand what we mean by linear and non-linear guaranteed liabilities for pension fund ? Often this exposures are hedged by Interest rates derivatives swaps and swaptions which I can ...
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171 views

PV of the Floating Side of an “Overnight Index Swap” (at the fixing Date)

I have a mathematical / theoretical question regarding the PV of an Overnight Index Swap (Floating Side) at the time of fixing. Starting from this question: How to compute Overnight Index Swap (OIS) ...

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