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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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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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65 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.
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1answer
319 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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229 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 ...
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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 ...
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162 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 ...
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1answer
195 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 ...
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1answer
457 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 ...
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29 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_{...
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120 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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165 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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61 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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180 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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2answers
696 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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153 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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945 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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82 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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241 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
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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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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620 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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38 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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24 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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46 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 ...
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55 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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76 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 ...
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1answer
789 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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170 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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240 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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123 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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54 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
235 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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996 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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283 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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133 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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157 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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56 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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1answer
92 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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30 views

Is the ACT/ACT.AFB convention meant to supersede the ACT/ACT convention for interest rate swaps

https://www.isda.org/a/pIJEE/The-Actual-Actual-Day-Count-Fraction-1999.pdf The determination of day counts are slightly diferrent between ACT/ACT (ISDA) and ACT/ACT(AFB). Is the latter more common ...
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52 views

OIS vs Libor for cross currency

I would like to understand the convention for discount rates fro cross currency swaps. It seems to be market convention (Australia) to discount collateralize positions with OIS and uncollateralized ...
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83 views

Vega for Constant Maturity Swaps

Why does a Constant Maturity Swap have a positive vega? Is it because of the convexity? How does one hedge it?
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59 views

How is Kalman Filter used to estimate Term structure Models

I am implementing "The Term Structure of Variance Swap Rates and Optimal Variance Swap Investments" . This paper is using kalman filter to estimate the state and the mean variance and a parameters on ...
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2answers
172 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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48 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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59 views

Real World pricing of a Constant Notional Cross Currency Swap

I have a question about Cross Currency (XCCY) Swap pricing in the real world. There are plenty of papers going nicely into detail, how XCCY Basis Swaps and XCCY Constant Notional Swaps work. Also ...
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103 views

Macaulay Duration Calculation on LIBOR/Swap term structures

I'm a bit confused as to how to use the Macaulay Duration Calculation method to calculate the duration of a swap in which the rates for both paying and fixed change every six months (LIBOR/Swap Term ...
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144 views

Pricing of Swaption by Proxy and Monte Carlo

here's the problem. Suppose you want to compute the price of a Call option on a Swap contract. Let $T$ and $T+S$ the times (in year fraction) where the Swap lives and suppose that the fluxes of the ...
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88 views

why swap rate not dependent on valuation date?

When I review my course on swaps, I read the following sentence: the value of the swap rate is independent of the valuation date(even though the PV's of the individual legs of the swap are clearly ...
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1answer
2k views

Compute I-spread from ASW-spread (or vice versa)

The I-spread ("mid swap spread" or yield-yield spread) is a standlone measure of credit risk, a security against matched maturity vanilla swap rate. Consider a package in which the investor receives ...