# Tag Info

## Hot answers tagged discount-factor-curve

16 votes
Accepted

### Deriving Interest Rates

There are two parts to your question and I'd like to answer them separately. Curve Construction On a daily basis, you can observe prices on a large variety of instruments, whose prices are driven by ...
• 10.9k
12 votes

### Swap curve construction

I think your question can be split into two parts: (i) how to value a swap mathematically and (ii) how swaps actually work as a traded product. Part (i): As noob2 pointed out, "theoretically"...
• 4,941
8 votes
Accepted

### Why are multiple custom curves (swap) built for one desk?

Chapter 1: Goldilocks is ousted by the bears Once upon a time, the banks used a fixing called LIBOR as a measure of the risk-free interest rate. Then the big hairy crisis came along and ate all our ...
• 3,589
8 votes
Accepted

### SOFR Discount Curve Construction in Nov 2021

Fixed vs SOFR swaps for longer maturities are very liquid, since the interbank market trades these directly now, and these are the best instruments to construct the long end of the curve (2yr to 50yr)....
• 13.7k
6 votes
Accepted

### Curve Euribor - Euribor 3M

It is incorrect to use 1m euribor or O/N euribor in a 6m Euribor forward curve. You should only use instruments based on 6M euribor, such as 1x7 FRA, 6x12 FRA or swaps v 6m Euribor, as you have done ...
• 304
5 votes
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### What curve are you shifting when you calculate DV01 for a swap?

Let's step back and look at the reason for making a DV01 calculation first before answering the question; The reason for making a DV01 calculation is to quantify what market movements has impact on ...
• 86
5 votes
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### When we try to build curves, why we need fixings?

When pricing a swap with at least one floating leg referencing some index, if the fixing date of the index is before evaluation date, but the floating coupon period start date, end date, and payment ...
• 4,963
5 votes
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### Swap curve construction

I think I understand the question, but maybe not. In USD market, the most liquid IR swaps have floating leg reset quarterly from 3Mo LIBOR. (The fixed leg is semi-annual. Ths will change when LIBOR is ...
• 9,219
3 votes

### Deriving Interest Rates

I don't think they are implying that future interest rates are predictable. They may be speaking of implied forward rates as predictors of future rates or, generally, of the yield curve as an ...
• 3,240
3 votes

### Dual discounted forward curve

Which currency are you looking at ? Say that your 1y swap would have yearly fixed payments vs 3M floating payments. Your 1.5y swap would probably have: a fixed payment 6m after effective date and ...
• 121
3 votes
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### Curve building dates overlapping impact on discount factor

There is no overlapping, the first instrument is tied to the LIBOR rate starting at $25/10/2019$, the second one is tied to the LIBOR Rate at $27/04/2020$. For the sake of clarity, let assume that ...
• 753
3 votes
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### Constant continuous forward rate interpolation

Assume the (annualised, continuously compounded) forward rate between two nodes, say $t_{10}$ and $t_{12}$, is constant, say $f_{10,12}$, then the discount factors of the two consecutive knots will ...
3 votes

### Interpolation and extrapolation of Discount factors

Be careful with various naive smooth interpolations of discount factors that are easy to screw up and may lead to unrealistic rates between the nodes. But your choice depends on your planed usage. If ...
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2 votes

• 5,333
1 vote

### Curve building for a swap

Try Howard Corb's book ["Interest Rate Swaps and Other Derivatives", Columbia Business School Publishing, 2012]. And your 2y rate looks odd which should be intuitively obvious - simple arithmetic ...
• 2,066
1 vote

### Correct Discount Curve for Exchange Traded (Centrally Cleared) Products

if you are asking how CME collateral is discounted, then you have two considerations: What does the CME give you on your USD cash? That's simple, it's OIS. You don't get the interest immediately, ...
• 2,403
1 vote
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### Correct Discount Curve for Exchange Traded (Centrally Cleared) Products

This question Setting the r in put-call parity? shows the details are subtle and nuanced, but the answer is to use the rate paid on the collateral or margin.
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1 vote

### Convexity in interest rate curve bootstrapping

Generally speaking there are more inputs that are required to precisely specify the multicurve structure, and they are potentially more important. For example consider constructing a EUR interest ...
• 7,997
1 vote

### Bootstrap discounted cash flow

It's difficult to see your screenshot. But I think you should just follow some real examples online instead of having people find out what's wrong on your side. This is an excel example, go play with ...
• 372
1 vote
Accepted

### Linear interpolation Discount factors

I don't recommend linear interpolation of DFs and the swap rates you are applying this to are either against 12M libor which is illiquid or you are not accounting for Quarterly or Semi-Annual floating ...
• 7,997

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