# Tag Info

### What does instantaneous forward mean?

1. Observable instruments, spot rates, and forward rates First remember that something observable means that you can observe/find the rate in the market by looking at traded rate instruments or ...
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### What does instantaneous forward mean?

Given a forward rate, for example: $F(t, T, T+\delta)$ The instantaneous forward rate $f(t,T)$ fixed in $t$ is the limit when $\delta \rightarrow 0$ of your forward rate. If the relation between ...
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The idea of assuming that the transaction cost is one half of the bid-offer spread comes from several assumptions: the positions are marked-to-market at mid; you can actually execute at bid or ask (...
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### FX Forward rate agreement valuation in quantlib

You are not giving the constructor a discountCurve. The constructor is: ...
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### Mid-curve swaption

You can only infer forward vol by pairing a mid-curve option with a spot option. It's easier to go through an example (I'll use 5y x 5y vol since I have the sketch below handy...) One decomposition of ...
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### STIR topics: Implied FX-OIS Basis and FX Forward/Swap Pricing

Implied FX-OIS basis should be pretty simple to "compute", it is the classical "Cross-currency" basis observed in FX Swaps & FX Forwards, that can be backed out when plugging ...
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### Which measure is used to price a swap?

I want to propose a different answer here. I think mathematical expectation (under any measure) is not used in valuing an interest swap. Years ago I used to explain swaps to beginners by speaking in ...
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### Pricing a Forward Rate Agreement using QuantLib Python

For a 3x6 FRA, you probably want to write something like: ...
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### Understanding FX forward points and market usage

There are two relevant sections on the help page, the direct links (e.g. if you have it in an IB) look like this: {LPHP FRD:0:1 2898067 }: ON ("Overnight"), TN ("Tomorrow-Next"), ...
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### Dynamics of LIBOR foward rate under T-forward measure

We assume that, under the risk-neutral measure $Q$, \begin{align*} dP(t, T) = P(t, T)(r_t + \sigma(t, T)dW_t), \end{align*} where $\{W_t, \, t \ge 0\}$ is a standard Brownian motion. Then \begin{align*...
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### Change of measure between T-forward and T*-forward contract?

By definition $Q^{T_s}$ is risk neutral for the numeraire $P(t,T_s)$, and $Q^{T_e}$ is risk neutral for the numeraire $P(t,T_e)$, hence  \left(\frac{dQ^{T_s}}{dQ^{T_e}}\right)_t = \frac{P(t,T_s)}{P(...
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### 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 ...
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### FX Forward pricing with correlation between FX and Zero-Cupon

We consider the expectation \begin{align*} E^{Q_d^{t_f}} \Big(P_d(t_f, T) X_{t_f} \mid \mathcal{F}_t \Big), \end{align*} where $Q_d^{t_f}$ is the $t_f$-forward measure, and $P_d(t_f, T)$ is the ...
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### forward space vs zero space in finance jargon

In interest rate land you can look at the yield curve in 3 ways: par space (a chart of the par swap rates of different maturities) , zero space (the zero coupon swap rates) and forward space (usually ...
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Consider a payer swaption with maturity $T_0$ and strike $K$. Here the strike $K$ is the fixed rate paid on the fixed leg of the underlying fixed-for-floating swap with reset dates $T_0, \ldots, T_{n-... • 21.1k 3 votes ### Mid-curve swaption You are correct. The midcurve swaption expresses the volatility of the forward swap rate , not the "forward volatility". The latter refers to the price of an option whose strike price will be ... • 17.1k 3 votes Accepted ### Dual Curve Bootstrapping - When to OIS discount? Modern curve building methodologies, certainly implemented in top tier fixed income trading houses, use a simultaneous non-linear solver to construct all curves at once. Essentially the procedure is: ... • 10.5k 3 votes Accepted ### Difference between settlement of Eurodollars and FRA Futures trading are settled on a daily basis meaning in the end of day, your account will be adjusted by your PnL. So of course your payment on T1 is not discounted. However forward is settled only ... • 609 3 votes ### What's the difference between instantaneous forward rates and observable forward rates? Recall that the simple forward rate as at time t for lending/borrowing between time T and$T+\tau$can be written in terms of the discount factors as follows:$F(t,T, T+\tau)= \frac{1}{\tau}\left( \...
The first equation is the result of the effort to show that the product of the forward and the relevant zero coupon, $F \left(t,T_n \right)P \left(t,T_{n+1}\right)$, can be treated as a traded asset. ...