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
363
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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
577 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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1answer
292 views
How do I value uncollaterised swaps?
Do I need to discount using the OIS curve?
Then add some sort of FVA adjustment over and above the CVA/DVA? How do I work out a banks cost of funding?
Any help would be greatly appreciated.
...
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1answer
616 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, ...
2
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2answers
411 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 ...
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1answer
894 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:
...
2
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1answer
698 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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2answers
3k views
In curve building: How to calculate interest rate (discount factor) for period before first known effective date
I am building a curve using par swaps rates. For example, I have the following two semi-annual swaps for input
Duration start end rate
1year 14-Nov-2011 14-Nov-2012 ...
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1answer
335 views
Given QuantLib Python VanillaSwap object, how to get the iborIndex of the swap object?
I'm currently using QuantLib Python. Let's say that I've got a VanillaSwap object:
import QuantLib as ql
swap_obj = ql.VanillaSwap(... , iborIndex , ...)
How can ...
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0answers
198 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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1answer
484 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 ...
0
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1answer
3k views
Bloomberg terminal swap zero curve calculation
I would like to ask about swap zero curve calculation algorithm by Bloomberg terminal. This is a plain vanilla CZK interest rate swap, fixing the Prague IBOR. My task is to calculate zero rates from ...
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2answers
2k views
Why do we swap the bond value and par value at the beginning in the Asset Swap
I may asked this question before, but I still don't understand. We know that in a asset swap,
A pays the fixed coupon on the bond
B pays LIBOR + Spread
The exchanges take place regardless of ...
6
votes
1answer
342 views
Discount curve and payment frequency
In case of uncollateralised trades, where we use LIBOR rates for discounting, does the LIBOR tenor have to match with the payment frequency?
For example, one of the swap leg pays USD floating amount ...
1
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2answers
622 views
FX risk of basis swap in foreign currencies
As an US investor, if I enter a basis swap in a foreign currency (say Euribor-Eonia basis in EUR), and book my trade using USD. I must have some sort of FX risk, right?
How do I hedge such risk? I'd ...
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0answers
405 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
183 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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2answers
2k 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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2answers
7k 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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3answers
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What curve are you shifting when you calculate DV01 for a swap?
I understand that a general swap has 4 curves attached to it: the flat forecast curve associated with the fixed leg, the forecast curve associated with the floating leg, the fixed leg discount curve ...
5
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1answer
581 views
Replicating Log Contract - Errors Introduced by Jumps
In the GS Research Note about Volatility Swaps, it is shown that you can replicate a pure variance exposure (hedge) with only vanilla calls and puts, primarily thanks to the Carr-Madan formula of ...
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2answers
2k 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
1k views
Valuing the floating leg of a swap
Let $P_{t}(\pi)$ be the price at time t of a zero coupon bond with time to maturity $\pi$. Furthermore, let $f_{t}(\pi_1, \pi_2)$ be the forward rate that is earned over the time period $[\pi_1, \pi_2]...
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0answers
137 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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4answers
4k views
How to compute Overnight Index Swap (OIS) fixed rate?
I understand that periodically participants exchange the difference in the fixed rate and the daily compounded overnight floating rates.
My question is how should one compute the fixed rate?
What ...
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2answers
144 views
Swap rates comparison
I'd like to compare the swap rates using OIS discounting $S_{a,b}^{OIS, 6M}$ and a swap rate $S_{a,b}$ not using OIS discounting:
$$S_{a,b}^{OIS, 6M}=\sum_{a+1}^b L_{6M}(0,T_i,T_{i+6M})\times df^{OIS}...
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1answer
113 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
5k 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 ...
8
votes
1answer
5k views
Forward and discount curves for cross currency swaps
I have a EUR-GBP cross currency swap, collateralised in GBP, each leg is paying 3m EURIBOR/LIBOR respectively. I know GBP leg can be modelled with 3m LIBOR forward curve and GBP OIS discount curve. ...
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3answers
4k 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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0answers
60 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
277 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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1answer
600 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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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 ...
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0answers
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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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2answers
273 views
Variance swap : ok for variance, but where's the square expectation?
Payout of a variance swap at maturity $T$ is proportional to $\left(\frac{252}{N} \sum_{i=0}^{N-1} R_i^2 \right) - \sigma_{\textrm{VS}}^2$ where $R_i \equiv \ln\left( \frac{S_{T_{i+1}}}{S_{T_i}} \...
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1answer
290 views
Does this trade have a name?
Ok so I got this idea, it's very simple so I know I'm not the only one who has thought about it. It is a pairs trade between long and short term treasury swaps, and goes as follows:
Going by ...
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0answers
359 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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2answers
1k 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 ?
3
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0answers
240 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 ...
1
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1answer
446 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$$
by vanilla option，say value $V(S,E;\...
2
votes
1answer
1k views
USD-Federal Funds for OIS swaps vs USD-Federal Funds for Basis swaps
Anyone knows why the OIS leg for basis swaps pays the average rate instead of the geometric average compounding rate as expected for a regular OIS swap leg?
2
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1answer
110 views
Why there is some inhomogeneous term in the PDE of fixed income
We consider one factor driving model of fixed income product say short-term interest $r(t)=\lim\limits_{T\rightarrow t} R(t,T),$ $R(t,T)$ is yield i.e
$$B(t,T)e^{(T-t)R(t,T)} = 1$$ Then we see ...
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1answer
545 views
Basis swap spread pricing and bootstrapping
Here is the expression of a basis floating versus floating swap where the first term is a forward CMS Swap leg and the second one is a forward BOR leg where X is the margin that would make equal both ...
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0answers
153 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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2answers
20k 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 ...
2
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1answer
826 views
How were OIS discount curves built before long-term OIS were liquid?
Many sources put the switch from LIBOR discounting to OIS discounting at some point in 2008, or perhaps a little earlier (the earliest I have seen is August 2007). It seems that this may be optimistic,...
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2answers
2k views
Single currency basis swap Risk sensitivity
How do I concretely quantify the delta of a single currency basis swap (ex:3mv6m LIBOR) ? Would you look at the PV impact for every bps change in the 3v6 tenor basis spread ?
Thanks in advance.
4
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1answer
5k views
QuantLib Python Swap Yield Curve Bootstrapping Dates and Maturities
This is somewhat related to the question I asked here but simpler. I am trying to bootstrap a yield curve from swaps, and am having a problem with the dates/maturities that are coming out. The code ...
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1answer
2k views
How to calculate fair 3s1s basis levels
How would one calculate the fair level of 3s1s single currency basis swaps using simply the 1m & 3m libors and ois levels? (so you have fra-ois spread levels in both)
I understand that as the FRA-...
