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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45 views

How the swap curve moves if fed fund rate decrease?

I am currently reading the book "Interest Rate Swap and other Derivatives by Howard Corb", in Chapter 8.2 Curve Trades, it mentioned: "Investors believes Fed is going to lowering the ...
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91 views

How to compute IRS DV01?

Assume 50k notional and annual payments, entering a long position in a 5y interest rate swap will pay 50k * fixed rate (i.e. predetermined 5y swap rate which makes PV equal to zero) and receive 50k * ...
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What is the correct way to build a full swaps curve using discount factor interpolation?

I want to keep this as high-level as possible so that the rest can be figured out, but we will use DF log-cubic interpolation. (Convert rates curve to discount factor curve, interpolate this using log-...
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85 views

Estimating SOFR daily rate from a given curve

Goodday. May i know how can i estimate those fixing rate in the yellow cell, with the curve given on the left? Would my step below work 1.perform linear interpolation to find the rate e.g. the fixing ...
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Potential risks Trade Idea

I came up with a trade idea that wins when Interest rates increase. I am playing that by buying a Payer Swap and selling a deep ITM Receiver swaption at ATM+60 (same notional). I chose that strategy ...
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70 views

Which curves to use for different swaps?

How do we determine which curve to use for pricing different swaps, for e.g. I don't understand how following come: Interest Rate Swap (USD) Fixed: USD Treasury Floating: none CCS (USDINR) Fixed: ...
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33 views

How to calculate net exposure on a Interest Rate Swap (and on derivatives in General)?

I would like to know how to measure Exposure on swaps (IRS, TRS...) in general . Example, if a party A has a OTC position of 100 million USD in IRS with party B, is party A exposure = 100 million ...
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88 views

Plotting a CSA curve in QuantLib

IRS under a CSA Let's consider an example of Interest Rate Swap under a CSA. To calculate discount factors that can be used to discount cashflows in one currency, $C_{1}$, collateralized in another ...
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86 views

How to compute the Brazilian Plain vanilla swap using Quantlib?

How to compute the BRL plain vanilla swap. I have followed the below methodology to calculate the valuation for other indexes but BRL-CDI is far off from actual valuation. Please suggest if anything ...
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55 views

JPYEUR Interest rate parity question

I have some questions related to an interest rate parity question. I have tried to answer them, but would really appreciate if you could let me know whether my answer makes sense or not. I am very ...
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32 views

How to price a Loan&borrowing deal(LNB) using cross currency basis?

I want to know how we can price a loan&borrowing(LNB) deal in USD using cross currency basis of my domestic currency is euro. For example, my domestic currency is Euro, I want to buy a LNB deal in ...
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75 views

Is the price of the following inflation derivative observed/traded?

Let $M_{t\to t+2}^{\\\$}$ be the pricing kernel (SDF) from period $t$ to $t+2$. Let inflation over period $t$ to $t+1$ be denoted by $\Pi_{t \to t+1}$. Is it possible to observe the following quantity ...
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87 views

How are total return swaps quoted?

A) spread $s$ only. B) spread subtracted from the funding, e.g. LIBOR, rate, i.e. $(r-s)$. ?
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33 views

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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70 views

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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85 views

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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46 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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31 views

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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45 views

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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103 views

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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302 views

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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54 views

Market pricing of forward US Treasury rates

What instrument(s) are used for forward pricing of US Treasuries? I know that Eurodollar futures are used for the market pricing of Libor in the future, but treasury futures only have contracts 3 ...
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64 views

Call Probability of European callable IRS

When pricing a callable IRS (say only one call date) with a diffusion model (e.g. HW 1F) with a Montecarlo resolution, one can get the call probability on the call date versus maturing the date (which ...
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68 views

FX swap trade question

(a) today, say I did a fx swap trade: long PHP/USD spot and short 1m PHP/USD forward. Then if 1m PHP interest rate goes up, I should make money (meaning i locked in paying a lower 1m PHP interest rate ...
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Let $L$ denote the three-month US dollar LIBOR rate and an interest rate swap arrangement where fixed rate is $L$ and floating rate is $24\% - 2L$

The following is a question taken from Heard on the Street. Let $L$ denote the three-month US dollar LIBOR rate. Consider an interest rate swap arrangement where Party A pays $L$ to Party B, and ...
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226 views

OIS Fixed Rate - how to calculate on trade booking?

I am trying to understand how the Fix rate on a OIS trade is calculated at trade initiation. I understand this process for a Fixed V LIBOR trade non collateralized ( discount and projection curve are ...
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665 views

Duration of forward starting swap

For a spot starting interest rate swap, the duration is calculated as the duration of the fixed rate leg less the duration of the floating leg. Each of these calculations is akin to calculating the ...
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1answer
170 views

Multi-legged Swap pricing

can anyone guide me how to price a multi-legged swap and whether I need Monte Carlo / LMM based approach or if there is a closed form solution. Receive leg "Libor 3m +1%" Payment leg If Libor is ...
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471 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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225 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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2answers
149 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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212 views

Factor sensitivities for EURUSD swap

Trying to understand various risk factors for a EURUSD swap. While I understand why a EURUSD swap would have USD LIBOR, EURIBOR, EURUSD currency as risk factors, why is it that it would also have EUR ...
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270 views

Volatility Swap Variance swap [closed]

Why do two different products trades as vol swap and var swap. Are these products not inter-convertible? I know Var swap has convexity and vol swap does not have but i don not understand how it helps ...
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348 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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122 views

On the buyside, when people quote a 'price' for a plain vanilla interest rate swap, does it include accrued interest?

The valuation date falls in between coupon payment days on the swap, does the 'price' of a swap understood to include the accrued interest (interest from the previous payment date to the valuation ...
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125 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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476 views

Swaption on a swap with 0 year tenor

Any ideas on valuation of IRS swaption on a swap with 0 year tenor? As an example, we have a 5 year swaption, on expiration it is cash settled; the underlying swap tenor is 0 years with excercise and ...
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3k 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 ...

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